A secret mortgage blacklist is leaving thousands of condo owners unable to sell their homes.
The list is compiled by mortgage underwriters Fannie Mae and has been expanded dramatically in response to the Surfside Condo collapse in South Florida in 2021. , which killed 98 people.
The tragedy exposed widespread issues with underinsured buildings and overdue repairs — not just in Florida, but across the US.
If a building crops up on the list it can be hard for a potential buyer to get a Fannie Mae-backed mortgage to purchase a condo there.
In turn, sellers in blacklisted buildings are stuck with unsellable units — adding to a market glut that drives down prices.
Fannie Mae backs around fifty percent of America’s mortgages and its approved loans signal a sound investment.
A home insurance crisis across the country is also making it harder for buildings to access affordable and adequate insurance.
Before Surfside, the blacklist contained just a few hundred buildings, condo lawyer Stephen Marcus told the Wall Street Journal.
This has now risen to 5,175, according to Marcus who has access to the list of buildings that do not meet Fannie Mae’s criteria.
Florida currently has 1,400 buildings blacklisted, more than any other state
Florida currently has 1,400 buildings blacklisted, more than any other state.
The state issued new legislation in the wake of the Surfside disaster which requires condos to have certain levels of reserves to deal with potential repairs.
California follows with 695, while Colorado, Hawaii, and Texas also have high numbers, often due to natural disasters and extreme weather risks.
Fannie Mae and its sister organization Freddie Mac do not make mortgage loans themselves but buy around half of American home loans from lenders and sell them on in packages to investors.
Loans that meet Fannie Mae or Freddie Mac standards can be less expensive and need smaller down payments.
The organizations have long required a minimum level of insurance that was easily met, to ensure the mortgage debt could be repaid if the property was damaged or destroyed.
Last year Fannie and Freddie issued updated guidance on it insurance requirements making the once easily met criteria much more of a hurdle for a growing number of properties.
Many condo owners are being left with unsellable properties due to the mortgage blacklist
Fannie Mae buys around half of American home loans from lenders and sell them to investors
The Surfside Condo collapse in Sothern Florida in 2021 killed 98 people
Insurers have also raised prices in recent years to offset the increased risks associated with the growing numbers of wildfires, hurricanes, flooding and other weather extremes associated with climate change.
Condo associations are trying to limit costs by agreeing to pared down insurance policies that then make their condos ineligible for Fannie Mae and Freddie Mac-backed mortgages.
A spokesperson for Fannie Mae told the Wall Street Journal its requirements are designed to ‘help protect borrowers from physically unsafe or financially unstable projects.’
Freddie Mac told the publication that it does not keep a list of developments that don’t meet its criteria.