FNMA Loans and Code Enforcement Liens

[Justin R.]

Alright, I need some expert input from those of you who work with Fannie and Freddie underwriting guidelines for a living.

What are the rules for originating a loan on a property that has a code compliance lien on it?  Assume that the lien has no monetary penalties applied (but, of course, there's a threat of fines).

Are there hand and fast rules?  Left up for interpretation?  How do you approach these things?

I have a feeling @Jerry Padilla may have experience here.

[Upen Patel]

@Justin R. Underwriting will not pass with any form of lien on the property which will not be cleared at closing. Also, a title company will not issue title insurance for the lender or the buyer. So its a dead deal.

Your options are:

* Get the seller to fix the issues and clear the lien

* Buy using rehab loan - FHA 203(k) if owner occupy, or Fannie HomeStyle if investment 1-unit

* Buy with HML/PML, fix the issues, clear the lien and then refi into a standard Fannie/Freddie loan