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Unsuspecting condo owners across the country have found themselves in a galling predicament. They have been placed on a secret mortgage blacklist which prevents them from selling their homes, according to The Wall Street Journal.
Maintained by the government’s loan backer, Fannie Mae, the list has grown from a few hundred residences to 5,175, according to a lawyer interviewed by the Journal with access to the information. According to the report, the list grew after the Surfside condo collapse in Miami in 2021, which killed 98 people. Unbeknownst to property owners, their buildings find themselves on the list if Fannie Mae concludes their building needs essential repairs or has inadequate insurance.
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More Stringent Underwriting Guidelines
Although Fannie Mae and the sister company, Freddie Mac, do not make loans themselves, they underwrite loans from lenders, buy roughly half of the country’s mortgages, and sell them to investors, guaranteeing payments through insurance.
Last year, the two companies tightened their guidelines, detailing red flags that could cause properties to be placed on the list. This has caused lenders to issue more stringent insurance requirements. Fannie and Freddie have standardized underwriting criteria. When loans conform to this, it is advantageous to the buyer, requiring lower down payments and better rates.
A Fannie Mae spokesperson disagreed with the Journal's characterizing the company’s database of buildings that are in a gray area of funding approvals as a “blacklist.” Although Freddie Mac’s insurance guidelines are similar to those of Fannie Mae’s, the company maintains that it does not have any type of list.
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The Surfside Condo Collapse Changed Everything
According to the list provided to the Journal by Boston law firm Allcock & Marcus, Florida has the most properties on it, with over 1,400 developments, due mostly to the tough condo safety law implemented in the wake of the Surfside collapse. California was next, with just over 700, followed by Colorado and Hawaii.