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Fannie Mae and the private way

Posted by Rona Fischman November 17, 2011 01:52 PM

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Do you know what a private way is? (Yeah, It’s the opposite of a public way.) A public way is land owned by the municipality that the public uses for a thoroughfare; in short, a road. A private way is also a road. But, the owner of the house owns half (or sometimes all) of the road in front. Towns will plow private ways so police and fire can get through. In towns that have garbage and recycling pick-up, the pick-up includes private ways.

The difference is twofold:

1. If a house is on a private way, the lot line of the property is in the road. So the lot includes the square footage under the road. Therefore a 6000 SF lot on a private road is smaller than a 6000 SF lot on a public road. (It is one of the things I check when I do a CMA) I see this in Arlington in a number of neighborhoods.They're in some in other towns, too. Seen 'em in Newton, Lexington, Somerville... There are developments with all private ways where the owners collectively need to plow and pave; I don't see those in the towns around Boston where I work.

2. Around Boston, where I work, private roads are plowed by the town, but in most cases they get paved or repaved by the private owners… or not. Have you driven on a really beaten-up road and wondered why the town was neglecting it? It might have been a private road. Private roads are maintained by mutual agreement. So, if the neighbors don’t get along well enough to chip in for road care, the road gets more and more rutted. I have run into owners who love their rutted private way; it keeps people off their street!

Fannie Mae got more particular about the houses that qualified for conforming loans. Private ways came under scrutiny. Now, to get a FNMA conforming loan a house on a private way must have a “private way agreement.” What’s that? It is a written agreement that there is some kind of plan to keep the road passable.

Some people who are trying to sell have a sudden need to talk to the neighbors. If they have a “bad roads insure my privacy” type next door, they are going to have to find a portfolio lender who will invest in their house. (Simply defined, a portfolio lender is a bank or other lending institution that makes mortgage loans with the intention of holding the loans in their investment portfolios. -source-) They invest in the loan, based on their assessment of both the credit-worthiness of the borrowers and the appraisal of the real estate as collateral.

There are lots of private ways scattered around the greater Boston area. Do you live on one? Do you have an informal agreement to keep the road serviceable? Do you have a formal one?

It seems like living on a private road has some of the problems condos can have. What are you seeing out there?

This blog is not written or edited by Boston.com or the Boston Globe.
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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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