Hundreds of California Condos Face Mortgage Hurdles

Fannie Mae has added thousands of condos to its blacklist, making mortgage approvals difficult for affected properties. The list, which now includes 5,175 complexes nationwide, targets properties that fail to meet insurance requirements or require urgent building repairs.

California ranks second on the list, with 695 blacklisted condos, following Florida’s 1,398. Many homeowner associations in disaster-prone areas struggle to meet Fannie Mae’s strict insurance standards, leading to their inclusion.

Mortgage Restrictions Lead to Falling Property Values

Although Fannie Mae does not issue loans directly, it buys mortgages from lenders and resells them as securities. Properties on its blacklist face mortgage restrictions, making transactions difficult and driving down home values.

In Ventura County, the Shadow Ridge condo complex, with 440 units, was added to the list in December after the entire complex switched to one insurance policy that did not meet Fannie Mae’s standards. Real estate agent Paul Gangi told WSJ that financing became impossible, causing multiple sales to fall through.

Kim Jin-Ah, a board member at Shadow Ridge, said obtaining a Fannie Mae-approved policy would increase insurance costs tenfold. She noted that wildfire risk classifications have made affordable coverage nearly impossible, leaving many homeowners unable to sell.

In Dallas, Texas, homeowner Robert Senzon unknowingly listed his condo for sale while it was on the blacklist. When a buyer’s mortgage was denied, he had to lower his price from $239,000 to $170,000, losing nearly 30% in value.

Industry Groups Push Back on Fannie Mae’s Policy

As more properties are affected, the insurance industry is voicing concerns. Jimmy Grande, senior vice president at the National Association of Mutual Insurance Companies (NAMIC), warned that Fannie Mae’s rules could destabilize the housing market.

Industry leaders are lobbying the Federal Housing Finance Agency (FHFA) to ease insurance requirements. Critics argue the policy disproportionately impacts high-risk regions and could devalue thousands of properties nationwide.

Fannie Mae defended its database but rejected the term blacklist, stating that these restrictions are meant to protect lenders and borrowers from high-risk properties. However, growing industry opposition may lead to regulatory pressure for reform.

BY WONHEE CHO [cho.wonhee@koreadaily.com]