The Wall Street Journal is reporting that Fannie Mae (OTCQB: FNMA) maintains a “secret blacklist” of condominium communities that makes it difficult, if not impossible, for these properties to get a mortgage.
The new report claims the blacklist “includes condo associations that the mortgage finance giant thinks don’t have adequate property insurance or need to make critical building repairs.” The blacklist has reportedly expanded significantly since Florida’s Surfside condo collapse in 2021 resulted in 98 deaths and is now at 5,175 properties.
Florida has more than 1,400 developments blacklisted, with California, Colorado, Hawaii and Texas rounding out the top five states. These markets have greater exposure to natural disasters and carry restrictive statewide insurance policies. As a result of the blacklist, these borrowers face the prospect of failing to secure mortgages that could be packaged for securitization by Fannie Mae.
A Fannie Mae spokesperson claimed the government-sponsored enterprise did not maintain a blacklist, but stressed its underwriting requirements were meant to “help protect borrowers from physically unsafe or financially unstable projects.” The spokesperson added Fannie Mae has an online tool that enables lenders to confirm whether it will accept loans from a specific project.
Freddie Mac (OTCQB: FMCC) has similar insurance requirements to Fannie Mae, but a spokesperson said it did not compile a list of condo developments that fail to meet its underwriting criteria.
Weekly Real Estate News reached out to the Federal Housing Finance Agency to discuss whether it is appropriate for Fannie Mae to maintain a blacklist of properties.
