FNMA Secret Blacklist: Understanding Fannie Mae’s Covert Condo Clampdown

REAL ESTATE NEWS (Los Angeles, CA) — In the labyrinthine world of real estate and mortgage financing, a clandestine maneuver by a government-sponsored entity is causing ripples of confusion and frustration. Fannie Mae, the Federal National Mortgage Association, has been discreetly compiling a blacklist of condominium properties nationwide – a list that is not only growing but also shrouded in mystery. This article dives deep into this perplexing development, unraveling its implications for condo sellers, buyers, and the real estate market at large.

Unveiling the Secret

The existence of this blacklist came to light through investigative journalism, particularly a detailed article in the Boston Globe. The piece, a meticulous work by correspondents Jim Morrison and Larry Edelman, uncovers the clandestine practices of Fannie Mae in maintaining a list of condo developments deemed ineligible for mortgage purchases.

The Blacklist: A Growing Concern

As of October 2023, the blacklist included over 2,300 condo developments across the United States, with a notable presence in states like Massachusetts, Florida, and California. The rationale behind this secretive list stems from various factors, including deferred maintenance, legal entanglements, and financial irregularities within condo developments.

A Domino Effect on the Real Estate Market

The blacklist’s existence poses significant challenges for condo owners and potential buyers. Since Fannie Mae and Freddie Mac dominate the mortgage market, being on this list means fewer financing options for buyers, leading to failed sales and reduced property values.

The Surfside Tragedy: A Catalyst for Change

The list’s expansion is partly attributed to the catastrophic collapse of Champlain Towers South in Surfside, Florida, in 2021. This tragedy prompted Fannie Mae to tighten its eligibility requirements, emphasizing the need to address aging infrastructure and maintenance issues.

Transparency and Accountability: The Core Issues

The secrecy surrounding the blacklist raises questions about transparency and accountability in the housing finance sector. Unlike the Department of Housing and Urban Development, which makes its denial lists public, Fannie Mae’s approach leaves many in the dark, including homeowners and potential buyers.

The Impact on Communities and Individuals

The blacklist not only affects large-scale real estate dynamics but also has a profound impact on individual lives and communities. For instance, Susan Evans, president of the Brook Village condo association in Boxborough, Massachusetts, was unaware of her complex’s presence on the list until informed by the Globe. The inclusion was due to groundwater contamination issues, highlighting how environmental factors can inadvertently entangle properties in this secretive web.

Looking Ahead: The Path to Resolution

Removing a property from the blacklist is a complex process, requiring sufficient documentation and resolution of the issues that led to its inclusion. This process is often arduous and not well understood by many affected parties. It calls for greater transparency and communication from Fannie Mae to ensure that properties have a fair chance to rectify their situations.

The Call for Change

As the real estate market grapples with this covert practice, there’s a growing demand for transparency and fairness in the handling of the blacklist. Legal experts, property managers, and homeowners are calling for a more open approach that balances the need for risk management with the rights and needs of property owners and buyers.

A Complex Puzzle with Many Pieces

Fannie Mae’s secret condo blacklist represents a complex interplay of real estate, finance, and governance. As the list continues to grow and affect more properties and individuals, the need for clarity and fairness becomes increasingly apparent. It’s a situation that calls for careful consideration and action from all stakeholders involved in the housing market, from government entities to individual homeowners.

In this ever-evolving landscape, staying informed and proactive is crucial for anyone involved in the condo market. Whether you’re a seller, buyer, or industry professional, understanding the dynamics of Fannie Mae’s blacklist is key to navigating these challenging waters. | MORE

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Copyright © This free information provided courtesy L.A. Loft Blog with information provided by Corey Chambers, Broker DRE 01889449. We are not associated with the seller, homeowner’s association or developer. For more information, contact 213-880-9910 or visit LALoftBlog.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Text and photos created or modified by artificial intelligence. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.

Unwarrantable Condo and Loft Loans Taking Over L.A.

REAL ESTATE NEWS (Los Anglees, CA) — If you’ve had your eye on a loft condo in Los Angeles, you’ve probably encountered some complex and perhaps discouraging aspects of the loan process. Among the most pressing challenges is the surge in non-warrantable condos – a category of real estate that is giving even the most seasoned investors pause. Litigation, lawsuits and other issues have long been a hidden trap for live/work and loft conversions. Even Alta lofts, home of the Loft Blog, has had loan issues. This article aims to shed light on these significant issues, the potential pitfalls you could encounter, and the solutions available to overcome these hurdles.

The Emergence of Non-Warrantable Condos

Today, non-warrantable condos are becoming more prevalent in Los Angeles, and indeed, across California. A condo is deemed non-warrantable when it does not meet specific criteria established by Fannie Mae or Freddie Mac, the government-sponsored entities that back a majority of U.S. mortgages.

Among the common issues that can designate a condo as non-warrantable are:

Inadequate HOA master insurance: If the condo’s Homeowners Association (HOA) insurance doesn’t meet Fannie Mae’s requirements, you’re in non-warrantable territory. This could mean insufficient coverage or high deductibles, either of which can pose significant risks.
Construction defect litigation: If a lawsuit is currently in progress over construction defects (known as SB 800 claims in California), this could be a red flag that moves the property into the non-warrantable category.
Deferred maintenance and ongoing repairs/construction: A history of deferred maintenance can suggest problems with property management and could potentially lead to costly repairs down the line.
Special assessments for deferred maintenance: These are fees collected by the HOA to cover significant repairs or improvements that the regular budget cannot accommodate. Such assessments can signify financial instability or poor planning.
High single entity ownership: If a single entity (individual, investor, or corporation) owns more than 10% of the units in the condo project, it can be deemed non-warrantable.
These are just a few of the issues that can render a condo non-warrantable, but the list is expansive and constantly evolving.
High Renter Ratio: A high ratio of renters to owner-occupiers can raise concerns for lenders. If a substantial percentage of units in the condo development are rentals, it can be classified as non-warrantable. The worry here is that owners who rent their units might be less invested in the upkeep of common areas and the overall stability of the condo project.
Commercial Space in the Building: While mixed-use buildings with both residential and commercial spaces are common in urban areas, they can pose challenges for obtaining a condo loan. If commercial space makes up a significant portion of the building’s square footage, it can push the property into the non-warrantable category.
Concrete Flooring Deemed “No Flooring”: Concrete floors, often found in industrial-style loft condos, can be a sticking point with some lenders. Despite their aesthetic appeal and popularity, these floors might be classified as “no flooring,” putting the condo at risk of being deemed non-warrantable.

Bridging the Gap with Loft Loans

The rise in non-warrantable condos might seem like an insurmountable obstacle. Yet, for those with their hearts set on a loft condo, there is a way to navigate this complex landscape: working with a direct lender who specializes in loft loans and unwarrantable condo loans.

These lenders, like UC Loans, offer conventional 30-year fixed mortgages, with as little as 10% down, even for non-warrantable condos. Furthermore, they have the ability to close transactions quickly – a vital advantage in today’s fast-paced real estate market. They bridge the gap where non-Qualified Mortgage (non-QM) lenders can’t, providing an essential lifeline for your next non-warrantable condo transaction.

And there’s even more good news. Some of these lenders are leveraging the power of artificial intelligence (AI) to streamline their processes. Take, for example, the newly available AI-backed Home Equity Line Of Credit (HELOC) up to $400,000, designed explicitly for non-warrantable condos. This loan requires no appraisal, no hard credit pull, no escrow/title, and can close in as little as 5 days.

While the proliferation of non-warrantable condos can complicate your loft condo acquisition, it doesn’t have to be a deal-breaker. By working with a direct lender experienced in navigating the complexities of loft loans and litigation loans, you can still realize your dream of owning a unique and stylish loft condo in Los Angeles. Be prepared, stay informed, and don’t let non-warrantable status put a damper on your loft aspirations.

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Browse by   Building   |   Neighborhood   |   Size   |   Bedrooms   |   Pets   |   Parking

Copyright © This free information provided courtesy L.A. Loft Blog with information provided by Corey Chambers, Broker DRE 01889449. We are not associated with the seller, homeowner’s association or developer. For more information, contact 213-880-9910 or visit LALoftBlog.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Text and photos created or modified by artificial intelligence. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.