Did you know condo associations can land on the list if it has violations related to structural or mechanical repairs that need to be completed?

Imagine a Pacific Northwest condo association that certain lenders won’t touch: It could be a nightmare situation for a buyer, seller, and the board in general. The unavailable list is part of a response to the Surfside, Florida condo tower collapse in June 2021. Following that tragedy, which occurred after association managers were warned about major structural damage, Fannie Mae, one of the government-backed entities that buys loans from banks, issued new guidance to lenders essentially shutting off loans for buyers in buildings with low reserve funds for structural repairs, among other risky scenarios.

If the building is non-compliant with Fannie Mae guidelines, some lenders may just reject the loan. Others may send the documentation to Fannie Mae and request an override—and that review may be what puts the building on the no-lend list.

That scenario is the new reality for many condominium associations in the Pacific Northwest as well as Florida and Texas that appear on a list putting them off limits for Fannie Mae lenders—and there is the potential for that number to grow exponentially in the next couple of years, according to lenders. While we have not yet encountered an association unable to get financing as a result of this banned building list—they concede it could be a significant problem in the near future.

If you’re a seller, buyer, or on an association board—wouldn’t you want to know if your building is on the list? Good luck with that. The list is not public; it is only available for view by Fannie Mae lender partners. An association best bet is to address maintenance issues as they come up, have a current reserve study and make sure there is adequate funding for major projects as they come up.