In less than five months America suffered a 35% increase of condominium projects ineligible for Fannie Mae financing: 
January 30 listed 1,414 as ineligible, jumping to 1,912 on June 20 of this year according to its data.


Brenda Douglas is a 71-year-old Black mother of two, grandmother of three, and great-grandmother of two. Douglas decided it was time to sell her south-side Chicago condo and head to Atlanta. Douglas’s family was calling--the family she holds so dearly. 

Douglas’s condominium buyer agreed to pay $285,000 and close on May 30 of this year. Ms. Douglas paid $225,000 for her south-side condo in 2001. She stood to make $60,000 after paying out settlement charges. Days before the closing, out of nowhere, came the shocker. Fannie Mae blacklisted Douglas's condo project, the Michigan Indiana Condominium Association. 

This meant anyone wanting to purchase or refinance any one of the 120 condos in her project using low-cost Fannie Mae funds was out of luck. 

“I was packed and ready to go,” said Douglas. “I was distraught when I found out. It’s unfair. We had no knowledge.” 

Condominiums approved and denied by the Federal Housing Administration or FHA and the Department of Veterans Affairs or VA are published by those agencies. But Fannie hides its list from the public. 

If a project is not approved by Fannie Mae (industry parlance calls this non-warrantable condo financing), you have very limited choices: You are going to have to pay cash for the condo; pay a substantially higher rate for a non-warrantable mortgage; investigate FHA or VA financing. 

FHA mortgages tend to be much costlier for well-qualified borrowers and for borrowers bringing in a down payment of, say, 10% or more. Eligible veterans, in-service military personnel, and their spouses are VA-eligible. This leaves the least costly and most widely available financing option off the table when it comes to Fannie ineligible condos. 

“Non-warrantability (mortgage financing instruments) starts when Fannie Mae won’t do it,” said Joe Lydon, co-founder and managing director of Lendsure. Non-warrantable Fannie Mae condo pricing starts at an interest rate of at least 1.75% higher than the 30-year Fannie Mae fixed rate mortgage. That's for a well-qualified borrower," said Lydon. "When there is more risk (poor credit scores, for example), there is an appropriate bump to pricing (pricing gets worse).” 

Full disclosure: My firm, Mortgage Grader, does business with Lendsure. 

There are other barriers to financing buyers for such blacklisted condos. For example, Fannie Mae allows a minimum of 3% down in certain situations. But non-warrantable condo mortgages typically require a minimum of 20% down. 

How important is Fannie’s blessing for condominium financing? 

January 31, 2023, Fannie Mae pulled the plug on 6,102 senior (55 and over) condos in Laguna Woods Village located in Laguna Woods, an Orange County, California suburb. 

The Village had 18 financed condo sales in April 2022 but just 4 in April 2023. That’s an 82% year-over-year sales volume drop Ouch! 

As of June 27, Douglas’s buyer received a new preliminary loan approval, but the condo complex review portion is still underway and remains a question mark according to the buyers’ mortgage loan originator. The MLO is not being identified because this person is not authorized to speak on the record. 

The buyers’ Fannie mortgage application was approved with 5% down, on a 30-year fixed rate at 6.875% without points. 

The currently pending non-warrantable mortgage requires 20% down, 2 points cost and a whopping 9% mortgage rate for a 30-year fixed. 

That requires more than $47,000 of additional funds between the added 15% down payment and the two points. 

Hurt me! 

Fannie Mae’s lack of transparency is financially blindsiding would-be homebuyers that are unwilling or unable to pay the extra freight just like Elaine L. She spent $2,000 on the mortgage application charges and a home inspector before she learned the condo project lost its Fannie Mae eligibility.  

When mortgage loan originators run pre-approvals through the Fannie Mae underwriting engine named Desktop Underwriter, DU does not systematically alert the MLO if the condo project is Fannie financing ineligible. 

In practice, at a much later date, and well after borrower charges are incurred for the property inspection, appraisal and HOA documents, the underwriter runs the condo project through Fannie’s Condo Project Manager or CPM to learn of its eligibility. 

Freddie Mac, the other mortgage giant, does not maintain a similar “blacklist.” Freddie Mac is adamant that it does not rely on Fannie Mae's ineligible list according to a Freddie Mac spokesperson. Instead, Freddie Mac has a condo review process. 

It is common knowledge, and it is my experience as a 37-year mortgage loan originator, that mortgage lenders don’t look past Fannie’s “do not fly list”. If the project is listed as unavailable for Fannie Mae financing, lenders do not bother to go through the time and labor-intensive Freddie Mac eligibility exercise. Lenders presume Freddie Mac uses the same criteria as Fannie Mae does.  

There is no Fannie Mae exception in the U.S. Supreme Court’s 2015 ruling about unintentional discrimination or disparate impact. 

The U.S. Supreme Court ruled Disparate Impact matters and is recognized under the Fair Housing Act in its 2015 decision: Texas Department of Housing and Community Affairs v The Inclusive Communities Project. Briefly stated, if a housing stakeholder does something legally acceptable but as a result it unintentionally causes discrimination against protected classes, it’s discrimination under the Fair Housing Act. Protected classes are Blacks and Hispanics for example. 

A legal defense to the disparate impact claim is that the housing stakeholder needed to do X for business purposes and there was no lesser solution to mitigate the problem.

I'm not a lawyer. I'm not a disparate impact expert. I have to wonder though, can this 2015 U.S. Supreme Court decision apply to Brenda Douglas and the 51% Black-owned Michigan Indiana Condo Association on the south side of Chicago?  Does Fannie Mae’s process of placing condos on the blacklist disproportionately affect the Black or Hispanic community? 

I sent a media inquiry to Fannie Mae about whether it has studied the important issue of disparate impact in respect to its ineligible condos. If a study had been completed, what were the fair lending analyses results? Fannie Mae did not respond. 

When primary mortgage market lenders are examined by regulators, they are expected to have census tract-level fair lending reviews conducted internally according to one mortgage industry attorney subject matter expert I had asked. 

I queried the Federal Housing Finance Agency, Fannie Mae's regulator and conservator, about Fannie's fair lending testing and why it, as Fan’s regulator hasn’t been on top of Fan about important fair lending issues. FHFA did not respond. 

Fannie’s blacklist impedes public access to demographic data 

The Michigan Indiana Condominium Association is comprised of 51% Black owners, 27% White owners, and 22% Asian owners.  A ground lease between the Illinois Institute of Technology and the Michigan Indiana Condo Association has existed since 2000, all according to Jack Beebe, portfolio manager of Forth Group. Mr. Beebe manages the building for the homeowner's association. 

Fannie Mae yanked its approval for the Michigan Indiana Condominium Association. “There was no notification (this was coming),” said Beebe. 

Why? Fannie Mae didn’t like some of the language in the ground lease between the condominium association and the landowner, Illinois Institute of Technology. 

“Fannie Mae deemed the association unwarrantable,” said attorney David Savitt, partner at KSN Law, representing the Michigan Indiana Condo Association. Savitt provided me with a copy of the ineligibility email memo. 

Beebe, along with Savitt, made an effort to respond to Fannie Mae's concerns by soliciting and obtaining a June 9 letter from the ground lease owner, Illinois Tech. 

“The letter sent to Fannie Mae was denied. It is my understanding the only way forward is to amend the ground lease that has been in effect for many years,” said Sherri Williams (via email), settlement attorney, Williams Legal Services LTD. Williams represents seller Brenda Douglas. “At this time, ITT, who holds the lease, is not willing to amend or accommodate Fannie’s new regulations/rules.” 

Is there a better solution than pressuring the ground lease owner, Illinois Institute of Technology, to "fix" the lease language? Fix it or forget it (project blacklisting stands) seems arbitrary, especially since there has been no harm or injury to any of the stakeholders for over two decades. 

I reviewed several Fannie Mae condo blacklists, the latest being the June 20 list of 1,914 projects or 334,197 individual condo units. The lists were provided by a Fannie Mae approved lender on condition that I do not publish the list. 

Fannie Mae is cutting off sizeable condo projects. The average number of units is 184. The median number of units is 105 units. 

Inquiring minds want to know including the National Association of Realtors 

I'm not the only one clamoring for transparency. The National Association of Realtors (NAR), the Community Associations Institute (CAI), and the Community Home Lenders of America (CHLA) wrote a June 21 letter to Sandra Thompson, FHFA director and the CEO’s of Fannie Mae, Priscilla Almodovar, and Freddie Mac, Michael DeVito. 

The big asks were for reasonable building inspection requirements for aging infrastructure and mandatory funding for major components of condominium buildings, a public comment period 60 days ahead of cutting off any condo projects along with a request for transparency of Fannie’s ineligible condo list. 

One oddity I noticed from the ineligible list is the "created date" and the "updated date." For example, Michigan Indiana Condo Association was "created" on 1/11/21 with an unavailable reason of "Ground lease does not comply with FNMA guidelines." Yet the association didn't learn that its project was Fannie Mae banned until May 2023. 

I also looked up the Laguna Woods Village project in which the public awareness date was more than 40 days after Fannie’s listed date. 

If the ineligible list dates aren't syncing up with the public awareness dates, then why the delays? How many folks unknowingly bought condo projects that were already red flagged but did not find out until after they closed? 

Maybe Fannie Mae is doing everything in its power to protect its financial interests considering its obligations under the Fair Housing Act.  Or maybe it’s not doing enough. And maybe Brenda Douglas and countless other Americans got the short end of the fairness stick. We’re never going to know unless Fannie Mae comes clean about its blacklist. 

Unintentional discrimination is a real thing. It’s not ok. 

Readers: An anonymous source told me that Fannie Mae contractors were reaching out to HOA board members, using the information obtained to approve or deny condo associations. Did Fannie Mae send a heads-up letter ahead of the phone calls? Did Fannie Mae's contractors offer interpreters for those who were not English literate? Did Fannie Mae empower the contractors with HOA approval or denial discretion? If you are an HOA manager, an HOA board member, or a Fannie Mae condo contractor, please contact me about these critically important questions of public concern at Or call my desk 949-334-2424.    

 June 27, 2023 Copyright 2023 Lazerson Learning

Jeff Lazerson is a mortgage broker. His website is

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Jeff Lazerson - Mortgage Columnist since 2011