F
annie Mae's tightened lending standards have left some property owners struggling to sell their units. In states like Florida and California, a growing insurance crisis is making it difficult for homeowners and buyers to obtain affordable coverage. The situation has worsened due to frequent and intense natural disasters.
A recent report by The Wall Street Journal revealed that Fannie Mae maintains a "mostly secret mortgage blacklist" of condo associations deemed underinsured. This list, which had around 300 properties before the Surfside condos collapse in 2021, now includes over 5,000 condo associations. With property insurance costs skyrocketing in Florida, this number is likely to increase.
Fannie Mae's database aims to protect borrowers from physically unsafe or financially unstable projects. However, if a property appears on the list, it can be a deal-breaker for buyers who plan to finance the sale. Florida has the largest number of blacklisted condo developments, followed by other disaster-prone states like California, Colorado, Hawaii, and Texas.
Condo owners have described the challenges of selling a blacklisted unit, even after slashing prices. Some have found cash buyers, while others were told to pay for additional insurance out of pocket. Condo associations are cutting costs by buying less comprehensive coverage, which can land them on the mortgage blacklist.
One Los Angeles condo was added to Fannie's list in December and would need to purchase a policy costing 10 times its previous premium to get back into compliance. Association board member Jinah Kim said, "The timing of the blacklisting is horrific... we now don't have a snowball's chance in hell of getting affordable insurance."
Industry experts warn that stricter rules could "destroy an entire marketplace," while others argue that loosening requirements would leave new homeowners underprotected. Recent shakeups at Fannie and Freddie may shift their policies, with newly installed board members likely to influence the direction of the enterprises.
