Secretive Lending Questionnaires Impact Affordable Housing

Updated lending questionnaires introduced last year by Fannie Mae and Freddie Mac have restricted access to mortgages and created condominium blacklists, impacting thousands of affordable housing units in the U.S. CAI is urging immediate adjustments.

The Orange County Register reports Fannie Mae and Freddie Mac are compiling troubling lists that prohibit mortgage financing for entire condominium or housing cooperative buildings. As the condominium blacklists grow, community managers and board members have no knowledge their buildings are on them. When people are unable to buy and sell units in these buildings, property values may be affected. Homeowners will have less money to fund regular maintenance in the buildings, leading to deferred repairs and higher costs.

In a 2022 letter to the Federal Housing Finance Agency (FHFA), which oversees the mortgage financing companies, CAI and others involved in the industry expressed significant uncertainty and concern over the temporary condominium and cooperative project eligibility requirements. These guidelines were released and implemented without comment and didn’t offer affected communities an opportunity to prepare or respond.

“Condominiums offer affordable housing options and access to housing for low- to middle-income families and the country’s growing aging adult population,” says Dawn M. Bauman, CAE, CAI’s senior vice president for government and public affairs. “CAI supports the intent of the requirements to ensure buildings are safe for homeowners and to minimize a mortgage lender’s exposure to risk. However, changes need to be made without restricting access to mortgages for homeowners living in condominiums and housing cooperatives.”

CAI and other stakeholders—community banks, lenders, and real estate agents—have held meetings and sent letters requesting changes and more transparency in how the guidelines are being developed. According to a 2022 CAI survey of condominium and housing cooperative volunteers and professional managers:

• 72% of respondents say they have been impacted by the updated Fannie Mae and Freddie Mac lending guidelines.
• 22–28% of respondents indicate they experienced a lender denial due to issues related to the questionnaire, not concerns pertaining to building safety.
• 30–42% of respondents indicate they have experienced significant delays in lender approval due to challenges pertaining to the new lender questionnaires.

Under the FHFA conservatorship, Fannie Mae and Freddie Mac are set to release permanent guidelines without a public comment process. There is industry fear the final guidelines will be even more restrictive and create more problems in the condominium and housing cooperative real estate market.

CAI is urging FHFA to immediately make the following adjustments:

• Change the condominium and housing cooperative project or loan approval program so that it is subject to a 90-day public comment period.
• Narrow the scope of the application requirements to buildings using an evidence-based practice that could include geographic location, age and height of the building, and type of construction.
• Allow for limited review of projects if they are not under evidence-based practices.
• Require Fannie Mae and Freddie Mac to make public the buildings ineligible for lending, eliminating so-called condominium blacklists.

CAI developed a guidance document to help homeowner leaders and community managers navigate the current lending requirements in their communities.

If you are experiencing condominium or housing cooperative lending issues in your community, please contact your Congressional representative today.

HOAresources.com explores questions and comments from community association members living in condominiums, homeowners associations, and housing cooperatives. We then assemble trusted experts to provide practical solutions to your most commonly asked, timely questions. We never use real names, but we always tackle real issues. Have a question or comment about your community association? Submit here for consideration: