A Secret List Straight Out of a Thriller?

It sounds like something from a suspense novel: a secret mortgage blacklist blocking home sales.
Yet, according to a recent Wall Street Journal report, that’s exactly what’s happening across the U.S. — and many condo owners are paying the price without warning.

In the wake of the tragic Surfside condominium collapse in Florida in 2021, which claimed 98 lives, Fannie Mae quietly began compiling a list of properties flagged for significant repair needs or insurance shortfalls.

If a condo appears on this confidential list, buyers may find it nearly impossible to secure a mortgage backed by Fannie Mae, effectively halting deals in their tracks.

Just ask real estate agent Paul Gangi, who watched a transaction fall apart last December when his listing in Shadow Ridge, a California complex, was abruptly flagged. Despite efforts to salvage the sale, the buyer had to walk away once lenders realized Fannie Mae had blacklisted the property.

A Growing List of Properties—and Growing Problems

Initially small, the blacklist has exploded to more than 5,100 properties nationwide.
Florida leads the count with 1,400 flagged communities, followed by California, Colorado, Hawaii, and Texas.

Because Fannie Mae and Freddie Mac purchase roughly half of all U.S. home loans, lenders now must cross-check condo projects against these entities before approving loans.
While Fannie Mae refuses to publicly call it a “blacklist,” for all practical purposes, that’s exactly what it is.

The tightening insurance guidelines following Surfside have created a snowball effect: higher risk = stricter lending = rising costs — and investors and homeowners are getting caught in the crossfire.

Insurance Costs Are Soaring—and Killing Deals

Even if your condo isn’t on the blacklist, financing could still unravel due to skyrocketing insurance premiums.
Take Shadow Ridge again: when the complex sought a Fannie-compliant insurance policy, it was quoted $2.6 million per year — 10 times its previous premium. Such costs make homeownership unaffordable and push many deals beyond feasibility.

This insurance escalation isn’t just paranoia. Fannie Mae and Freddie Mac are tightening standards to protect against catastrophic losses — but in the process, they’re making many buildings financially unsustainable for buyers and sellers.

Why a Condo Might Be Blacklisted

Several factors can land a condo project on Fannie Mae’s restricted list:

• Unresolved structural or safety concerns
• Insufficient reserves for ongoing maintenance and unexpected repairs
• Pending litigation, increasing financial risk
• Investor-heavy ownership, making communities less stable
• Non-compliant insurance policies, failing Fannie’s stricter post-Surfside requirements

Knowing these risks is crucial before buying or selling a condo today.

What to Do If a Condo Is Blacklisted

If you discover your dream condo is flagged — or your listing hits a roadblock — there are still ways forward:

• Consider a cash purchase or alternative lending options outside of traditional banks.
• Negotiate seller financing, especially if the seller is stuck without other buyers.
• Engage Fannie Mae or Freddie Mac to learn about remediation steps and potential removal from the blacklist.
• Request property repairs or updates to fix known deficiencies and renegotiate the sale price accordingly.

But beware: fixing financing issues might be possible. Fixing insurance issues? That’s a much harder battle.

The Insurance Challenge: A Growing Crisis

Sky-high insurance premiums are rapidly becoming the biggest hurdle for buyers and investors alike.
In disaster-prone regions like Florida, many owners are turning to non-admitted or surplus lines insurance — policies lightly regulated and often more expensive.
Bloomberg recently reported that between 2022 and 2023, premiums for non-admitted insurance surged by 27.5%, compared to just 13.8% in traditional markets. In Florida, use of these riskier policies grew by 73% since 2009, now covering over 92,000 homes.

These non-standard policies are typically used for high-risk commercial operations — and they come with serious drawbacks: fewer consumer protections, higher costs, and no state guarantees if the insurer fails.

Final Thoughts: Research Is More Critical Than Ever

If you’re planning to buy or sell a condo, especially in states like Florida or California, due diligence is no longer optional — it’s essential.

Since the blacklist isn’t publicly accessible, you’ll need to:

• Contact the condo association to verify if the building is flagged.
• Review HOA financials to ensure sufficient reserves and good maintenance practices.
• Request recent structural reports before committing to a purchase.

If you’re an investor, factor escalating insurance costs into your underwriting models.
In many cases, cash flow and affordability assumptions from just a few years ago no longer hold true.

Without major reforms — whether through federal intervention or creative insurance solutions — condos in high-risk areas could become increasingly unsellable, threatening broader housing market stability.
And unfortunately, in today’s political and financial climate, meaningful change is far from guaranteed.

In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“