In April The Real Deal featured an article that Fannie Mae keeps secret “blacklist” of properties. It reports that Fannie Mae keeps a list of 1400 condominiums that they will no longer finance. This list is growing and is currently more than 1700. It is supposedly to protect borrowers from unsafe and financially unstable buildings.
This is significant because Fannie Mae buys loans from banks, credit unions and other lenders that meet their standards and package them as Mortgage Backed Securities (MBS) to be sold to institutional investors. Condos that meet their standards have better rates and lower down payments from 5 to 20%. These loans are known as conventional financing. There are fewer lenders that will lend to condo projects that don't meet Fannie Mae eligibility. They will have interest rates generally 1 to 1.5% higher and down payments of 25% or more.
The list is only shared with lenders. The only way most buyers find out is when they are turned down for a loan because the condo they are buying is on the list. Common reasons for making the list are insufficient reserves, insufficient insurance and pending litigation. Florida is among the states with the most condo on the list. This is one of the fallouts of the looming insurance crisis in Florida. I myself learned the hard way about all of this. I had a condo I own in Palm Aire under contract. The deal fell apart at the 11th hour because of recent changes to the master insurance policy deductible. That was all it took. I can this see this happening all over Florida. More so to older buildings and there are a ton of buildings built in the 60s and 70s in South Florida.
Blacklisted condos can still get financed using non-conforming loans at a higher rate in most cases. This blacklist is only about 1% of all the condos in the country. Save yourself some trouble and expense if you are purchasing a condo and ask your lender if it is still Fannie Mae eligible before you go viewing them and making offers.
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