Fannie Mae’s Condo Blacklist Is Growing, and Reports Are That It’s a Bear to Get Off

May 2025

Tags: Fannie Mae

The number of properties that fail to meet Fannie Mae's standards for property insurance or that have failed to do necessary building maintenance has risen to 5,175, according to the Wall Street Journal. That's up from about 1,400 in June 2023. News of the spike has spread in the past month.

You may be thinking, “Why should I care? Our condo will never land on that list!”

Don't be so sure of that, says one of our experts.

Fannie's Checking How Well Your Condo is Run

You can check Fannie Mae's list of condos on its so-called blacklist by registering with Fannie Mae at condostatus.fanniemae.com.

Just a year and a half ago, HOAleader.com reported on the jump in condos on the list, when Orest Tomaselli, president of project review at Philadelphia-based Condo-Tek, revealed the increase to 1,400 from about 900. He declined to be interviewed for this article.

Our experts who regularly work with condo boards say they're not seeing their own clients get pulled onto the blacklist—but they're aware of condos that have been.

“I'm familiar that it exists,” says Gregory R. Eisinger, a partner at Eisinger Law who represents condos and HOAs throughout the state; he also teaches a course on condo law at Nova Southeastern University, Shepard Broad College of Law and Florida state-approved condominium and HOA board certification courses. “I've been told by communities that potential buyers aren't allowed to get loans to purchase in those associations because Fannie Mae has done that. I know it's happening.

“To my knowledge, it's based on a long list of criteria Fannie supposedly analyzes these situations with,” he adds. “Does the association have reserves? Where are their collections? How many renters do they have? A lot of things that go into whether Fannie is going to continue buying and guaranteeing loans for condos in certain associations.”

Feeling a Little Kafkaesque

Some boards that have found their condo on the list have been stumped by their inclusion and unable to reach anyone in authority to argue that they shouldn't have been added to the list.

“It's not my client, but somebody in our firm works with a condo that was added to the list recently,” states Andrea L. O'Toole, a community association lawyer for 15 years and the founder and shareholder at Andrea L. O'Toole PC in Lafayette, Calif.

“They were added, and they're trying to get off the list,” she adds. “They think the reason they got added was because of an engineer's report. In California, a while back, the legislature passed SB 326, called the balcony bill. It requires associations to inspect basically load-bearing wood structures. Then they have to do a report, then do repairs.

“One of the problems is that these reports are prepared by engineers or architects,” says O'Toole. “The report might say you're good, or it might say—which is more common—there's more work that needs to be done. They'll categorize the work. If there are life-safety issues, the engineer or architect will say some repairs need to be done immediately. There may be other repairs recommended, but those don't necessarily need to be done immediately. There's probably useful life remaining, so they're not safety issues.

“These reports are causing some associations in California to be put on the blacklist,” she states. “I don't know if the people reading these reports understand that the engineer is required to put these assessments in their report and that these repairs can cost millions. To raise those funds, condos have to budget and perhaps raise special assessments. That might mean the work might not get done for another five to seven years.

“I think in the one we had recently, they condo is trying to get information to Fannie Mae so they can get off the list,” says O'Toole. “They think Fannie Mae has misunderstood a report. But they're having a hard time getting hold of someone there. The reality is that if you get on the list, it's really hard to get off.”

Is the Answer Not Sharing with Fannie?

Could you just not provide a reserve or inspection report to Fannie Mae? “This question does come up a lot in California: Do we give that report or not?” says O'Toole. “If you don't give it, sometimes that leads you—I'm told—to get put on the backlist. You're not giving Fannie Mae enough information to show your project is secure. Whether that's true or not, I'm not sure.”

That question is hotly debated in California. “We have a special statute that says the association has to provide the homeowner with certain documents so they have what they need to provide information to potential purchasers,” says O'Toole. “Those disclosures aren't going to the buyer from the HOA but from the seller. The question becomes, well, do you give that report to potential buyers?

“There are differences of opinion on whether that report has to be or should be given to buyers,” she states. “The statute says that once the report is created, it has to be incorporated into the association's reserve study. Some people have read that to mean that it's literally part of the reserve study and that it's one of the records that has to be disclosed in escrow.

“Others say you read the report and can include that information as necessary in the reserve study, which I think is more accurate,” says O'Toole. “Because as soon as you do repairs, that report is outdated. You also have a requirement to submit information that's accurate. So you then send a letter saying these repairs have been done. There's a whole can of worms nobody anticipated when the balcony bill law was passed.”

The Less Maintenance You Defer, the Better

The best way to avoid getting on the Fannie Mae blacklist? Do everything necessary to maintain your building properly, though that can be tough on some owners.

“We've been working with clients on having better reserves,” says Eisinger. “A law was passed in Florida after the collapse of Champlain Towers that requires associations to maintain structural reserves, and owners are no longer allowed to waive those reserves. It's no longer a decision for the association; they have to maintain.

“Unfortunately, a lot of associations can't afford to fund reserves, and that's not just limited to lower-economic associations; there are high-end condos who say they can't afford to do that,” he states. “They say they're just not going to do it.

“I've seen people screaming at meetings over this,” says Eisinger. “Some associations are actively working against their own interest in a way by not doing the things they're legally required to do or that they need to do to be able to get off the blacklist. That's because many owners really can't afford it.”

Reposted from HOALeader.com

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