If you have a client looking at buying a foreclosure, you should be aware of a new rule from Fannie Mae that took effect on July 1.

Before Fannie will back a loan for a buyer, it now requires that the seller of the foreclosed home “clear all liens for delinquent homeowners association dues and condo assessments on properties acquired through foreclosure or deed-in-lieu of foreclosure.”

In other words, your buyer might not be able to get a loan if there are unpaid HOA or condo dues on the property.

And when a foreclosed home is owned by a bank, there’s an excellent chance that those dues aren’t being paid — HOAs don’t know where to send the bills, and banks don’t keep track of every property’s HOA membership. The HOA/condo lien only rears its ugly head when some tries to get a mortgage to buy it.

So, to save your clients the frustration of being denied a loan because of an HOA lien, you might want to have the seller do its research first to be sure it’s all clear.

You can read more detail about what the Fannie Mae ruling means over at National Mortgage News, or check out the ruling itself (PDF).