Fannie Mae Blacklist: Is Your Condo at Risk?

Over 5,175 condo buildings fail to meet Fannie Mae standards, restricting mortgage eligibility.
Deferred maintenance and insufficient reserves are key reasons condos become non-warrantable.
Properties in disaster-prone areas like wildfire and flood zones face increased scrutiny and denial.
Non-warrantable condos often require higher down payments and carry higher interest rates.
Las Vegas condos built before 2005 are at particular risk due to insurance and structural issues.

Understanding the Fannie Mae Blacklist: Is Your Condo at Risk?

Tens of thousands of condo owners across the U.S.—including in popular markets like Las Vegas—are unexpectedly facing obstacles when trying to sell their homes. The reason? A growing list managed by Fannie Mae that restricts financing for certain condominiums because of insurance problems, unsafe conditions, or poor financial planning. Buyers and sellers alike must understand how non-warrantable condos and stricter condo insurance rules can disrupt real estate deals.

What Is the Fannie Mae “Blacklist”?

Fannie Mae, a leading government-sponsored entity (GSE) in America for mortgage backing, keeps a confidential internal database of condo complexes that do not meet its eligibility standards for loans. While officially this is not called a “blacklist,” industry insiders and real estate professionals informally use this term to describe its restrictive effects on lending approval.

When a condo or townhome complex is placed on this list, traditional financing—especially Fannie Mae-backed loans—is automatically denied. This restriction usually does not concern the buyer’s qualifications but instead comes from the overall condition or financial situation of the property.

According to Fannie Mae, the list is designed to “prevent borrowers from becoming financially tied to physically unsafe or financially unstable properties.” Unfortunately, the flagged status often stays hidden from possible buyers until late in the purchasing process—when loans are denied, deals fail, and much time and money have already been spent.

Why Are So Many Condos Becoming Non-Warrantable?

Condos that do not meet standards set by Fannie Mae or Freddie Mac are known as non-warrantable condos. These buildings have higher risks and generally do not qualify for standard financing programs. The increasing number of non-warrantable condos comes from several important issues

Insufficient Insurance Coverage

A major cause for becoming non-warrantable is insufficient insurance. In response to rising premiums across the country, many HOAs choose cheaper insurance policies that do not meet Fannie Mae’s support levels. Among the most common missing items are

Missing fidelity bond coverage (required if the HOA handles large amounts of money)
Insufficient general liability coverage
Exclusion of major events like floods or earthquakes

Buildings that save on policy premiums now face long-term trouble, as lenders see this underinsurance as a significant liability.

Physical Deterioration and Deferred Maintenance

Structural worries are another main reason for non-warrantable classification. Fannie Mae now needs detailed records on repair schedules, engineering reviews, and reserve studies. If a building has

Deteriorating infrastructure
Delayed major system replacements (HVAC, roofing, plumbing)
Cladding issues or water leaks

It may fall into the non-warrantable category. Older buildings—especially those more than 20 years old—are often checked for deferred maintenance issues.

Shared or Non-Standard Insurance Policies

Some HOAs share umbrella policies across multiple buildings or related homeowner associations. These agreements, while seemingly cost-effective, often do not meet Fannie Mae’s strict building-by-building insurance expectations, as seen in the example of Shadow Ridge in Los Angeles.

As a result, any difference from the standard master insurance setup can automatically make a unit non-warrantable.

Geography and Risk Zones

Developments located in areas prone to wildfires, floods, or hurricanes face a difficult situation. Even if the complex is well-kept and insured, being located in a high-risk area can greatly increase insurance costs. For some communities, these policies are simply not obtainable.

Las Vegas, while not usually known for floods or fires, may experience secondary effects of increased insurer caution and growing severity of events in nearby areas.

The Fallout for Sellers: When Financing Vanishes Overnight

If you are a condo owner looking to sell, finding out that your property is non-warrantable can be very upsetting. What starts as an exciting negotiation can end in disappointment as buyers leave because of sudden loan disqualification.

According to the Wall Street Journal, more than 5,175 condo complexes currently do not meet Fannie Mae’s lending standards. The actual number may be higher, as Fannie Mae keeps its list private and regularly updates it based on insurance checks and repair assessments.

Real-World Impact on Sellers

Deals fall apart during escrow
Properties remain unsold for longer periods
Owners feel pressure to lower listing prices
Greater need for cash buyers or specialized lenders

In fast-moving markets like Las Vegas, these problems feel particularly difficult. Sellers finding out their building’s ineligibility too late in the process have few choices beyond starting over or lowering their price to attract a specific buyer.

Buyers: Proceed with Caution on Non-Warrantable Condos

For buyers, purchasing in a non-warrantable complex brings higher financial barriers and fewer financing choices. Because loans backed by Fannie Mae and Freddie Mac are essentially not available, buyers must consider

Alternative Loan Sources

Portfolio Lenders: Small banks or credit unions that offer customized loans, often keep the mortgage in-house.
Hard Money Loans: Fast but expensive, sometimes used in distressed or investment situations.
Non-QM (Qualified Mortgage) Loans: Available to borrowers with non-traditional income or complex financial situations.

Expect Stricter Loan Terms

Minimum 20%-30% down payment
Higher interest rates (often 1-3% over the average)
Tighter debt-to-income ratio limits
Shorter-term balloon or ARM structures

Buyers should be extra careful and complete thorough research on both the building and lending terms before committing.

Condo Insurance Requirements: The Unseen Barrier

After the tragic 2021 Champlain Towers South collapse in Surfside, Florida, nationwide attention turned to condo safety and insurance rules. Insurers began reassessing risk across vertical housing communities, especially in older and high-density condominiums.

The result: HOAs were forced to either

Significantly raise assessments to afford better policies
Reduce coverage to basic minimums, risking financial and legal danger

Fannie Mae updated its condo questionnaire after 2021 to demand

More clear disclosure of deferred maintenance issues
Proof of structural inspections
Full insurance documentation, including details that affect long-term habitability

For HOAs that underfund reserves or do not prioritize property upkeep, this scrutiny has made insurance compliance almost impossible, resulting in a growing number of condo buildings being considered ineligible for lending.

The Freddie Mac & Fannie Mae Divide: What’s Really Happening?

Although Freddie Mac says it has no formal “blacklist,” it uses very similar underwriting filters as Fannie Mae. Both entities need

Adequate reserve funding (typically 10% of the annual HOA budget)
Full disclosure of special assessments
Structural safety certifications
Fully compliant master insurance coverage

The result? Regardless of the words used, both GSEs can and do restrict mortgage access to condos they consider risky. Unfortunately, unit owners rarely have control over the broader issues causing these designations.

The Las Vegas Angle: Why Local Condos May Be at Risk

Las Vegas experienced significant condo development between the late 1980s and early 2000s, creating a now-older inventory open to deferred maintenance flags and changing insurance rules.

Some specific challenges local HOAs face include

Rising repair costs because of inflation and labor shortages
Low reserve fund amounts after years of small dues increases
Harsh desert weather affecting roof, stucco, and mechanical lifespans
Minimal disaster preparedness despite increasing weather changes

These challenges have made many Las Vegas condo communities a combination of financial risk, insurance problems, and non-warrantability dangers.

Investing in Non-Warrantable Condos: Should You Risk It?

From an investment viewpoint, non-warrantable condos come with clear downsides—but for the right buyer, they can also present chances.

Pros

Less competition from typical buyers
Potential for lower price-per-square-foot
Options if buying with all-cash or outside standard lending

Cons

Difficult future resale without creative financing
Immediate need for cash-heavy purchase
Limited increase in value because of resale bottleneck

Smart investors must research the HOA’s finances, get reserve studies, and verify that the property has long-term compliance potential. If it does not, have a plan to sell.

Action Plan for HOA Boards & Community Managers

HOAs have a very important role in deciding whether a condo remains warrantable. Here is how they can actively protect their eligibility

Schedule Reserve Studies Every 3 Years: Measure what future maintenance costs are coming.
Aim for 10-20% Budget Reserves: This is required in today’s lending situation.
Obtain High-Quality Insurance: Avoid “basic” policies that may fail lender inspections.
Maintain Honest Documentation: Engineering reports, reserve summaries, and board meeting minutes all matter.

HOA boards that act now can prevent future financial problems—and keep unit owners satisfied.

Tips for Sellers: How to Avoid Delayed or Failed Sales

Before listing your condo in a market under scrutiny like Las Vegas

Get a Condo Questionnaire: Your HOA should provide one confirming whether your building meets Fannie/Freddie criteria.
Speak With Loan Professionals: They will often know buildings already flagged and can warn you early.
Consider Pre-Qualifying Buyers With Portfolio Lenders: This avoids surprises during escrow.
Partner With Specialists Like Steve Hawks: Experienced agents understand alternative negotiations and non-QM loan pathways.

Being active can mean the difference between a smooth closing—and no closing.

Smart Buyer Strategies for Navigating Non-Warrantable Properties

If your ideal condo comes with financing challenges, it does not always mean you should walk away. Here is how buyers can move forward

Larger Down Payments: Lowers loan-to-value ratios, which banks prefer.
Work With Specialized Mortgage Brokers: These experts know which lenders offer portfolio or non-QM loans.
Negotiate Sales Price: Sellers in these buildings may be more open to price changes.
Get Professional Inspections: Confirm the property’s condition before accepting the added risk.

With the correct approach, buying in a flagged building can still be possible—especially for long-term living rather than flipping.

Demand for Transparency: A Rising Consumer Issue

Too often, both buyers and sellers are not informed about a condo building’s lending status until they are well into negotiations. This creates emotional stress, wasted time, and even legal issues.

The industry is seeing increasing requests for

Required disclosures when listing non-warrantable condos
Open access to HOA financial reports available to possible buyers
Lender-consumer platforms that centralize warrantability information

As buyers become more informed and lending scrutiny increases, clear real estate practices will become even more important.

Final Thoughts

The growing list of non-warrantable condos—often called the Fannie Mae blacklist—is creating new difficulties in today’s housing market. With condo insurance rules becoming stricter and repair standards increasing, both buyers and sellers must stay alert. Understanding what makes a building non-warrantable, knowing how financing limits change, and partnering with experts like Steve Hawks are important steps to keeping your deal going.

For Las Vegas residents specifically, awareness, timing, and smart partnerships can be the difference between success and failure in a more regulated condo real estate situation.

Sources

Wall Street Journal. (2024). Condo sales hit by Fannie Mae list amid insurance challenges. Retrieved from https://www.wsj.com