brown 4-layer bricked building With reports indicating the Trump administration is planning  to privatize Fannie Mae and Freddie Mac. Many homeowners in Washington state are wondering what this could mean for them. These two government-sponsored enterprises (GSEs) are the foundation of the American mortgage market, buying loans from lenders and providing the liquidity that makes home financing accessible. While the exact details of any privatization plan are still being debated, the potential impacts on condo associations and HOAs are a key concern.

For condo and HOA associations across Washington, the most direct impact of a privatized Fannie and Freddie could be a change in financing availability and cost for buyers. Currently, the GSEs have very specific requirements for the condo projects they will finance. These guidelines have become stricter since the Surfside collapse, with a strong emphasis on financial health, adequate reserves, and a professional reserve study. In a privatized model, these new entities would answer to private shareholders, who may demand higher returns. This could lead to a reassessment of risk and potentially stricter, or even different, lending criteria for community associations. For condo and HOA residents in Bellevue, Seattle, or any other part of the state, this could mean that future buyers face higher interest rates or have fewer financing options.

The privatization plan has the potential to reshape the housing market by removing the implicit government backing that has kept mortgage rates low. Without a government guarantee, investors may view mortgage-backed securities as a riskier investment and demand a higher return. This would translate to higher mortgage rates for borrowers. For Washington’s already competitive housing market, this could further impact affordability for prospective buyers, especially first-time buyers and those with less robust credit. For current condo and HOA owners, this could mean a smaller pool of potential buyers when it comes time to sell, which may put downward pressure on property values if financing becomes a significant hurdle.

It is crucial for condo and HOA communities in Washington to be proactive in preparing for these potential changes. Maintaining a healthy financial outlook, including a well-funded reserve account based on a professional reserve study, will be more important than ever. Boards that have prioritized deferred maintenance, addressed structural concerns, and avoided special assessments will likely be in a much stronger position to meet any new and evolving criteria from a privatized Fannie and Freddie. In an uncertain market, financial prudence and a commitment to long-term planning will be the best defense against potential disruptions and will help ensure the continued stability of your community.