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Fannie Mae’s Secret Condo “Blacklist” Is Wreaking Havoc on Real Estate Deals
It may sound like a plot from a political thriller, but for condo owners and investors across the country, it’s real: a confidential mortgage restriction list maintained by Fannie Mae is stopping deals in their tracks and blindsiding sellers. Quietly compiled after the tragic 2021 Surfside condo collapse in Florida, the list identifies thousands of buildings that Fannie Mae considers too risky to back — and in some cases, that makes financing a sale nearly impossible.
The Fallout of a “No-Lend” Label
The so-called “blacklist” isn’t public, nor does Fannie Mae officially refer to it that way. But real estate agents and lenders are seeing the impact firsthand. When a property is flagged, traditional financing options vanish overnight. That’s exactly what happened to a listing in the Shadow Ridge complex in Ventura County, California, when the lender suddenly pulled out after learning the building was on Fannie’s list.
And it’s not just a handful of properties. The list has ballooned to more than 5,100 condo and co-op buildings nationwide, with the highest concentrations in Florida, followed by California, Colorado, Hawaii, and Texas.
Why Properties Are Being Blacklisted
The criteria for being added to Fannie’s restricted list are based on safety, finances, and insurance readiness. Common reasons include:
- Unresolved structural or maintenance issues
- Inadequate reserves for repairs or capital improvements
- Pending litigation
- Excessive investor ownership ratios
- Insufficient or non-compliant insurance coverage
While some of these issues are legitimate concerns, the lack of transparency in how buildings are added — or removed — has caused confusion and chaos for sellers and buyers alike.
Skyrocketing Insurance Costs: The Hidden Culprit
Perhaps the most disruptive consequence of Fannie Mae’s tightening guidelines is the surge in required insurance coverage, which has driven up premiums drastically. In the case of Shadow Ridge, a Fannie-compliant insurance policy was quoted at $2.6 million annually — ten times higher than the current policy. For many buildings, these costs are unsustainable, pushing up HOA dues and driving down affordability.
This isn’t an isolated issue. Condo associations across high-risk states are seeing insurance premiums soar, particularly after Fannie and Freddie Mac raised their underwriting standards.
Can You Still Buy or Sell a Condo on the List?
Yes — but it’s complicated. If a unit is located in a flagged building, financing through traditional Fannie- or Freddie-backed lenders is often out of reach. That leaves a few potential options:
- Cash purchase or alternative financing (e.g., private lenders)
- Seller financing, if the owner is motivated and flexible
- Negotiation for repairs, insurance upgrades, or price adjustments
- Contacting Fannie or Freddie to better understand what’s needed for reinstatement
Due diligence is key. Always review a building’s HOA financials, recent inspection or engineering reports, and verify the insurance policies in place before making an offer.
The Rise of “Non-Admitted” Insurance
As traditional insurance becomes harder to secure, particularly in disaster-prone areas like Florida and California, many associations and homeowners are turning to non-admitted or surplus lines insurance — typically used for high-risk commercial ventures.
These policies are not backed by state guaranty funds, are less regulated, and come at a premium. Yet in a tight market, they may be the only option. Between 2022 and 2023, non-admitted home insurance premiums rose 27.5%, and in Florida, usage has surged nearly 73% since 2009, now covering over 92,000 homes.
While not ideal, this emerging trend reflects just how desperate some associations are to maintain coverage and remain eligible for financing.
Final Thoughts: Investors Must Proceed With Caution
If you’re a real estate investor eyeing condos — especially in markets like Florida, California, or Hawaii — proactive due diligence is now non-negotiable. Ask your lender early whether a property is on Fannie Mae’s restricted list, request HOA documents, and understand what type of insurance coverage is in place (and how much it costs).
With the “blacklist” not publicly available, investors must lean on professionals: agents, lenders, and insurance brokers who understand the current regulatory environment.
Ultimately, the rising insurance burden and opaque lending restrictions may continue to pressure condo valuations and sales activity. Without state or federal intervention, liquidity and affordability in many condo markets may continue to erode — particularly in areas most exposed to climate and structural risk.
For investors willing to navigate the complexity, opportunities may arise — but only for those who do their homework
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“
Fannie Mae’s Secret Condo “Blacklist” Is Wreaking Havoc on Real Estate Deals
Has the U.S. Housing Market Finally Begun to Thaw After the Pandemic?
It seems like the housing market might be showing signs of life. According to a recent report from Redfin, pending home sales in early October have seen their largest year-over-year rise since 2021, with a 2% increase in the four weeks ending October 6.
This news is likely to be welcomed by real estate investors who have felt the market has offered limited opportunities over the past few years. However, it’s important to take a cautious approach—one promising statistic doesn’t necessarily indicate a broader trend.
Is the Housing Market Truly Recovering?
Let’s explore the different factors at play.
Interest Rate Reductions: A Critical Factor or a Red Herring?
The Redfin report links the surge in pending sales to the Federal Reserve’s much-anticipated rate cut announcement in mid-September. According to Redfin, this announcement prompted buyers to re-enter the market in late September, despite mortgage rates having already been falling for weeks before the cut.
This psychological boost is crucial. Although buyers were aware of the falling rates beforehand, many seemed to be waiting for a formal signal to act. This could be attributed to a lingering fixation on the ultra-low rates of 3% to 4% that buyers enjoyed before 2022.
Any rate cut announcement serves as a nudge for prospective buyers, making them feel that now might be the right time to purchase, even if mortgage rates had been decreasing already. In an unstable mortgage market, such announcements hold significant influence.
However, mortgage rates are just one piece of the puzzle when analyzing housing market performance. As noted by Investopedia, the real estate market is driven by four primary factors: interest rates, demographics, economic conditions, and government policies.
Demographics: Shaping the Market
During the pandemic, demographic shifts had a profound effect on U.S. real estate, with major population movements like the Sunbelt migration fueling booms in cities such as Phoenix and Austin, which later became unaffordable for many.
Age is another key demographic factor, and the millennial generation’s pent-up demand continues to be a driving force behind the rise in home purchases. Despite the challenges of the past few years, millennials who have longed to become homeowners are now entering the market in greater numbers, as more properties become available.
Rising Inventory: A Sign of Stabilization
A key factor contributing to the market’s stabilization is the growth of housing inventory over the last year. The pandemic had a significant impact on the availability of homes, with sellers hesitant to list properties due to COVID-19 restrictions and, later, higher mortgage rates.
Some homeowners, particularly those upgrading to larger homes, found it financially challenging to sell and take on higher mortgages. Others, however, simply chose to wait for a more favorable market.
Although the latest Realtor.com report shows that inventory remains down by 23.2% compared to pre-pandemic levels, we are seeing an upward trend. For instance, new listings have been rising since last year, with a 5.7% year-over-year increase for the four weeks ending October 6.
As of September 2024, some states have even surpassed their pre-pandemic inventory levels, including Tennessee, Texas, and Idaho, with others, like Washington, close behind.
Vulnerabilities in Certain Regions
However, not all regions are showing positive signs. For example, some areas, particularly those affected by extreme weather, have seen inventory spikes not because of market recovery, but due to homeowners trying to offload damaged properties they can’t afford to repair.
For instance, regions like Florida and North Carolina, hit by hurricanes, have experienced increases in home listings, but these may reflect a response to climate-related challenges rather than market health.
Opportunities for Investors
Investors should be discerning when choosing markets, focusing on regions where inventory is growing due to increased home construction rather than climate-related distress. States like Idaho, Utah, North Carolina, and Texas, which are building new homes, offer potential, though caution is needed in areas prone to natural disasters.
The Midwest and Northeast, meanwhile, still face significant challenges in recovering to normal market conditions. These regions have lower rates of new construction, meaning inventory remains scarce, which could present both opportunities and difficulties for investors.
The Bottom Line
The U.S. housing market is showing signs of recovery, but the situation remains complex and varies by region. Interest rates play an essential role in unlocking the market, but investors should also consider other critical factors, such as homebuilding trends, climate risks, and government policies. While the market is heading in the right direction, it’s crucial to examine regional differences carefully before making investment decisions.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“