Is Your Condo Being Blacklisted???
Edited by: TJVNews.com
Across the United States, thousands of condominium owners are discovering an unsettling reality: they can’t sell their homes—not because of market prices, personal circumstances, or lack of buyer interest—but because of a growing, largely hidden mortgage restriction system. At the center of the issue is a fast-expanding list maintained by Fannie Mae, which many industry professionals refer to as a “blacklist,” though the agency disputes that term. As detailed in a Wall Street Journal report that appeared on Monday, the implications of this list are rippling across the nation’s real estate markets, leaving owners stranded, sales collapsing, and entire communities in limbo.
The impact of this issue is more than theoretical—it’s already derailing real estate transactions on the ground. One stark example reported by The Wall Street Journal involved real estate agent Paul Gangi in Ventura County, California. He was preparing to close the sale of a townhouse in Shadow Ridge, a large 440-unit condo and townhouse complex. Just days before closing, the buyer’s lender made a panicked call: Shadow Ridge had been flagged—blacklisted by Fannie Mae. The buyer scrambled to find alternative financing but failed. The deal collapsed.
Gangi’s experience is not unique. According to numerous real estate agents and mortgage professionals cited by The Wall Street Journal, deals across the country are falling apart at the last minute when lenders discover that a property is on the Fannie Mae list. Buyers are left without financing options, and sellers are left with homes they can’t offload—even in otherwise strong markets.
The list in question includes condo and homeowners associations that Fannie Mae believes fail to meet certain financial or safety thresholds—particularly related to structural integrity and property insurance. Since Fannie Mae does not issue loans directly but rather buys loans from lenders to repackage and sell to investors, its standards determine whether a mortgage can qualify as a “conforming loan,” which typically offers lower interest rates and down payment requirements.
Fannie Mae’s standards, according to The Wall Street Journal, have grown significantly more stringent since the catastrophic collapse of the Surfside condominium building in Florida in 2021, which killed 98 people. In response to Surfside, Fannie Mae began applying heightened scrutiny to condo projects, focusing on deferred maintenance, structural issues, and insufficient insurance coverage.
Stephen Marcus, a prominent condo attorney with the law firm Allcock & Marcus in Boston, told The Wall Street Journal that the number of properties failing to meet Fannie Mae’s lending criteria has ballooned to 5,175 developments nationwide, up from just a few hundred before Surfside. Legal and financial professionals who work with mortgage lenders have access to this list, but ordinary homebuyers and sellers typically do not—making it a silent obstacle in the middle of an otherwise routine sale.
Compounding the blacklist issue is a broader insurance affordability crisis. Condo associations are finding it increasingly difficult to secure adequate coverage, particularly in states prone to natural disasters or regulatory constraints. As The Wall Street Journal reported, Florida alone accounts for more than 1,400 blacklisted properties—a number driven higher by a strict post-Surfside condo safety law and skyrocketing insurance premiums.
Other states heavily represented on the list include California, Colorado, Hawaii, and Texas—all regions with high exposure to wildfires, hurricanes, or restrictive insurance markets. The problem is exacerbated by last year’s update to Fannie Mae and Freddie Mac’s lending guidelines, which clarified disqualifying insurance conditions and forced lenders to adopt a stricter underwriting posture.
Fannie Mae insists that the list is not a “blacklist.” A company spokesperson told The Wall Street Journal that its database includes both projects that meet and those that do not meet its lending criteria, and that lenders can use an online tool to verify a property’s eligibility. The agency emphasized that its standards are meant to “help protect borrowers from physically unsafe or financially unstable projects.”
Freddie Mac, Fannie’s sister organization, has similar insurance requirements but claims not to maintain a formal list. However, industry professionals note that the practical outcome is the same—properties that fall outside the guidelines are effectively cut off from mainstream mortgage financing.
The lack of public access to the list has created a transparency gap. Sellers are often unaware their property has been flagged until a deal is already in motion. Buyers, meanwhile, find themselves blindsided when their loan applications are rejected based on criteria they never knew existed.
For condo owners, this situation can feel like being trapped in financial quicksand. Even in hot housing markets, many find their units unsellable because buyers cannot secure financing. Those who need to move—due to job relocation, family changes, or financial hardship—are left in limbo.
Real estate professionals say the ripple effects are significant. Not only are individual sellers affected, but entire communities can suffer declining property values as the stigma of non-conformity spreads. Developers, too, face increased costs and legal complexities when trying to bring new projects to market under these stricter rules.
The hidden blacklist maintained by Fannie Mae represents a structural vulnerability in the U.S. housing system. As The Wall Street Journal reported, the list reflects real safety and financial concerns—but it also highlights how regulatory shifts, opaque criteria, and external market pressures like insurance shortages can intersect to create major bottlenecks in housing liquidity.
In years past, insurance compliance for condo developments was a standard, almost routine requirement for mortgage approvals through Fannie Mae and Freddie Mac. Today, those same requirements have become deal-breakers. In case after case reported by The Wall Street Journal, sellers are losing deals, slashing prices, or being forced to accept all-cash buyers at a discount simply because their condo associations don’t carry insurance policies that meet the agencies’ updated underwriting guidelines.
Robert Cenzon, a condo owner in Dallas, experienced the consequences firsthand. After listing his two-bedroom unit for $239,000, he learned that a neighbor had been forced to sell at a discount after a mortgage-backed deal fell apart. The Wall Street Journal reported that as weeks dragged on without offers, Cenzon slashed his price to $170,000. Even then, the buyer’s mortgage was denied—because the association’s insurance didn’t include replacement cost coverage for amenities like the pool. While the sale eventually closed after the buyer found a different lender, Cenzon admits: “I just got lucky… Otherwise, I think I’d probably still be stuck with that place.”
The underlying problem is a widening chasm between what insurers are willing to offer and what Fannie Mae and Freddie Mac will accept. Condo associations across the country are being priced out of compliant coverage, leading many to adopt pared-down insurance policies that fail to meet Fannie and Freddie’s standards.
As was indicated in The Wall Street Journal report, insurance companies are increasingly offering policies based on depreciated value rather than full replacement cost, especially for high-cost assets like roofs. They also want to push deductibles to higher levels—another red flag for Fannie and Freddie. The result is a surge in noncompliant policies that make entire condo developments ineligible for conforming loans, cutting off a major pipeline of mortgage financing.
Some associations can technically purchase Fannie-compliant policies, but at prices many consider unaffordable. For example, Shadow Ridge—a 440-unit complex in Los Angeles that was recently blacklisted by Fannie Mae—received a quote of $2.6 million per year for a compliant policy, 10 times their existing cost, according to board member Jinah Kim, The Wall Street Journal reported. The development, located in a brushfire zone, was spared by recent wildfires but now faces insurance costs so high that board members say there is no feasible way to comply without devastating homeowners financially.
To meet Fannie Mae’s standard for a stand-alone insurance policy—rather than a pooled policy shared with other properties—Shadow Ridge would need to nearly double its monthly homeowner fees, from $570 to over $1,100, according to real estate agent Paul Gangi. “That is totally unrealistic,” Gangi told The Wall Street Journal, “especially for the folks that might be elderly or on a fixed income.”
This financial squeeze is placing homeowners in a brutal double bind: stick with affordable, noncompliant insurance and become blacklisted by Fannie Mae, or pass on the massive cost increase to residents and risk pricing them out of their own homes.
The blacklisting may not affect existing mortgages, but it significantly depresses the resale value of units, as new buyers can no longer access conforming loans. This forces sellers to rely on cash buyers or pursue alternative financing—both of which narrow the buyer pool and drive down prices.
At the heart of this crisis is a deepening standoff between the insurance industry and the housing finance authorities. The Wall Street Journal report explained that insurers, represented by industry groups such as the National Association of Mutual Insurance Companies, are lobbying the Federal Housing Finance Agency (FHFA), which oversees Fannie and Freddie, to revise the mortgage guidelines.
“We saw the Fannie and Freddie guidelines and we’re like ‘whoa, whoa, whoa, that will destroy an entire marketplace,’” said Jimi Grande, a senior vice president at the association, in comments reported by The Wall Street Journal.
Insurers argue that current market dynamics make full replacement cost coverage financially untenable. But from Fannie and Freddie’s perspective, such coverage is essential to protect homeowners and lenders alike. If a building is destroyed and insurance only pays depreciated value, homeowners could be saddled with crippling reconstruction costs or mortgage debt on properties that no longer exist.
Supporters of Fannie and Freddie’s standards maintain that their guidelines are meant to ensure financial stability and safety, not sabotage home sales. They point out that if policies fail to cover the full cost of rebuilding, the consequences in the aftermath of a natural disaster could be far more catastrophic—both for individual homeowners and for the broader mortgage market.
As The Wall Street Journal report has shown, what began as a post-Surfside safety tightening has morphed into a systemic issue with wide-ranging consequences for housing affordability, mobility, and wealth equity—especially in states prone to climate-related disasters.
In markets like Florida, California, Colorado, Hawaii, and Texas, the problem is already acute. Thousands of developments have been blacklisted, and a growing number of owners are discovering that even willing buyers can’t secure financing due to issues entirely outside the seller’s control.
Industry experts fear this trend could become a major drag on the U.S. housing market, particularly in middle-income segments where condos represent an affordable entry point for many first-time buyers.
The escalating tension between insurers and mortgage regulators is no longer just a niche concern—it is a structural risk that threatens to paralyze entire segments of the U.S. housing market. As The Wall Street Journal has documented, the ripple effects of stricter insurance requirements are pushing condo owners into financial corners, forcing massive price cuts, and upending conventional housing finance.
Whether the FHFA, Fannie Mae, and Freddie Mac adjust their policies—or whether associations can secure affordable, compliant coverage—will determine whether this crisis deepens or abates.
For now, many homeowners are left in a precarious position: owning properties they cannot sell, in communities they can’t afford to insure.
(@Bubblebathgirl) 
