By Bryan Farley, Association Reserves, LLC. 

News has spread throughout the HOA world regarding the ‘mortgage blacklist’ that could impact the resale ability of condominium and co-op associations. The ‘mortgage blacklist’ refers to a list of HOAs that Fannie Mae, a major mortgage financier, deems ineligible for conventional loans. This list is not public, and condo owners and associations usually learn of their inclusion only when a buyer's loan is rejected. 

This is a cause for concern but, thankfully, managers and board members have an ability to check to see where their community stands.  

Fannie Mae has introduced a new online tool to help associations check their eligibility status and identify any conditions that may be causing them to be unapproved. This tool aims to enhance the efficiency of condo/co-op lending and create a transparent environment that benefits all participants.

Why is Fannie Mae Eligibility Important?

Being “Fannie Mae Qualified” is important, as it allows individual consumers to get the most attractive mortgage terms. Lenders like to sell mortgages in the association to Fannie Mae, enhancing their liquidity, and enhancing their ability to make more mortgages available to other consumers. Providing a way for lenders to increase their liquidity by selling off their mortgages is the reason why Fannie Mae and Freddie Mac exist. Mortgages in associations not Fannie Mae approved for one reason or another will not qualify for sale to Fannie Mae, and become burdensome to the lender. In those cases, the consumer will be offered less attractive mortgage terms, which makes purchasing the home more expensive, which could potentially lower home values in the affected community.

Why Is a Community Ineligible? 

Fannie Mae (and Freddie Mac) have minimum physical and financial standards for condo and co-op associations to appear on their “approved” list. For example, a minimum Reserve Funding rate of 10% of total budget is one of their criteria. Both organizations increased their scrutiny over which associations were and were not “approved” for mortgage purchases after the tragic collapse of Champlain Towers South in 2021. This led to an increase in the number of associations not approved. However, this also led to confusion among managers and board members regarding if their association was approved, and if not, why. 

How to Establish if a Community is Eligible

Fannie Mae has released a website (https://condostatus.fanniemae.com) to provide managers and board members the ability to check if Fannie Mae is aware of any condition at the project that does not meet one or more of their published Selling Guide (B4-2) requirements. This website creates transparency into the association’s Fannie Mae approval status by explaining why the association may not meet their published requirements.

How to Use the Tool

Managers and board members can access the information by registering on the website (https://condostatus.fanniemae.com) and searching for their community by providing appropriate identifying information (name, address, tax id#…). Homeowners and potential buyers may also ask the manager or a board member to look up the association to learn the status in advance of any upcoming sale, purchase, or mortgage event.

What to Do if Your Association is Not Fannie Mae Approved

Associations can remedy any identified conditions and are encouraged to work with the mortgage lenders currently working with individual buyers so that their lenders can submit clarifying documentation to Fannie Mae. Once received by Fannie Mae, they will review the information to determine if an update to the project status is appropriate. If the association remains on the unapproved list, Boards and Managers can encourage their homeowners and potential buyers to work with lenders to explore other financing options.

With this new online tool, Fannie Mae has made appropriate adjustments to enhance the efficiency of their condo/co-op lending process and created a transparent environment that benefits all participants and drives sustainable homeownership.

Bryan Farley is the President of Association Reserves, CO and has completed over 3,000 Reserve Studies and earned the Community Associations Institute (CAI) designation of Reserve Specialist (RS #260). His 14+ years of experience includes all types of condominium and homeowner associations throughout the United States, ranging from international high-rises to historical monuments.