Are owners in your condominium having trouble selling or re-financing their units? If so, it may be due to the condominium property being blocked by Fannie Mae for not meeting its lending criteria. Fannie Mae does not make loans, but it does purchase and guarantee them in the secondary market, which reduces risks to banks, making them more willing to extend mortgages.
Since the Surfside condominium collapse in 2021, regulators have been taking a closer look at aging buildings, requiring stricter financial and structural criteria. Based on a recent article in the Wall Street Journal, the blacklist already impacts over 5,000 condominium properties across the country and industry experts predict the list will continue to grow.
When a condominium property is blacklisted, mortgage providers are less likely to provide financing to purchase or re-finance units within the property because FNMA will not guarantee the loans. This can have a negative impact on property values by making it more difficult to sell or refinance a unit using conventional loans, which leads to the unit sitting on the market for an extended period or attracting only investor-owners who can pay cash and plan to rent it.
Why are condominium associations added to the blacklist?
There are several factors that can result in FNMA adding a property to the list, including:
- insufficient insurance
- underfunded reserves
- outdated reserve studies
- too many rentals; or
- deferred maintenance and structural deficiencies.
What can condominium associations do?
We recommend that the Board of Directors:
- Fund their budget in accordance with their reserve study as closely as possible.
- Update their reserve study every 3 years.
- Address recommended maintenance and capital repair projects timely. and
- Consult with their management and legal counsel to best determine a strategy for correcting any deficiencies.
If your association is interested in learning more about our services and how we can help, please Contact us using the Request for Proposal and type “FNMA Blacklist” in the subject field.
Kaman & Cusimano is exclusively dedicated to representing condominium and homeowner associations, with offices currently in Kentucky, Ohio, Tennessee, and Wisconsin. Under our Community Protection Program, we provide continued support, including access to free samples, newsletters, seminars, and even some phone calls.
