Written by: Internal Analysis & Opinion Writers
Fannie Mae and Freddie Mac have recently increased the amount of information they share about condominium developments—particularly those classified as ineligible for financing. While the move has been praised as a step in the right direction, many lenders say the enhancements still leave major gaps in transparency and usability.
The changes follow heightened scrutiny of condo projects after the 2021 collapse of the Champlain Towers South in Surfside, Florida. In response to growing concerns about building safety, deferred maintenance, and structural risks, both GSEs introduced more stringent eligibility criteria. This included the creation of ineligible project lists, effectively blacklisting condos that failed to meet the new standards.
To improve communication, Freddie Mac introduced an appeals process allowing associations and stakeholders to challenge their project’s ineligible status. Fannie Mae, meanwhile, is developing a searchable online tool set to debut in the third quarter, which will allow condo boards, homeowners associations, and property managers to verify a project’s eligibility status in real time.
Despite these efforts, industry professionals argue that the updates fall short. Lenders report that the data made available is often too limited or delayed, leaving them unaware of a project's status until late in the underwriting process. In some cases, ineligibility is discovered only after a loan is well into closing, leading to disruptions for buyers and lost deals for lenders.
One of the main complaints is the lack of detail behind a condo project’s denial. While the GSEs may label a building ineligible, they rarely provide specifics about which criteria were not met—whether it’s inadequate reserves, lapsed insurance coverage, unresolved special assessments, or structural repair issues. Without this information, it becomes difficult for associations to take corrective action and for lenders to guide buyers accordingly.
The issue has been exacerbated by rising insurance premiums, especially in coastal and high-risk markets. Some associations have seen rates increase tenfold, creating compliance issues with coverage requirements set by Fannie and Freddie. These market conditions further complicate a condo project’s ability to meet GSE guidelines—even when buildings are structurally sound.
The rise in condo ineligibility has also given a boost to non-qualified mortgage (non-QM) lenders, who are increasingly offering alternative financing options for units in non warrantable projects. While these loans help fill a market need, they typically carry higher rates and stricter terms, which can limit accessibility for traditional buyers.
Industry leaders are calling for more robust solutions. They want clearer explanations for ineligibility, automated updates when problems are resolved, and expanded collaboration between lenders, condo associations, and regulators. The goal is to ensure that safety is preserved without stifling access to financing or unfairly penalizing projects due to temporary or technical issues.
Some suggest that more proactive outreach from the GSEs could help streamline compliance. Rather than relying on reactive appeals, a system that flags emerging eligibility issues early and allows for preemptive resolution would be more effective for everyone involved.
Until such changes are made, lenders are adjusting by initiating condo project reviews earlier in the loan process. They are also educating real estate agents and borrowers about potential delays and recommending due diligence before making offers on units within large developments.
While the recent data-sharing improvements mark progress, the industry consensus is that more work remains. Ensuring consistent, transparent, and actionable information will be key to restoring lender confidence and maintaining access to affordable condo financing across a wide range of markets.
