02/25/2026
Recently a very qualified condo buyer was denied a conventional loan due to the HOA not being "warrantable" because of a few buildings in the community not having full replacement coverage on the old roofs inside the HOA insurance policy.
Along with my attached blog article of what happened, here is more to better explain why condo buildings are not warrantable if there are any triggers to question it structurally.
My blog which I did not use AI to write btw, talks about that condo collapse in Florida a few years back and since then things have been more strict to get approvals for Fannie loans.
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Fannie Mae is not reacting to one roof. They are protecting the credibility of trillions of dollars in mortgage backed securities.
After the Surfside condominium collapse in Florida, the issue was not that insurance failed.
The issue was that an aging building with known structural warnings had deferred maintenance and funding delays as well as ignored engineer's warnings as well.
That shook confidence at a bond market level. Investors began asking a much bigger question.
How many other aging condo projects across the country look stable on paper but have hidden structural liabilities underneath.
Fannie does not insure buildings. Fannie buys mortgages and packages them into securities that trade globally.
Those securities are deeply connected to U.S. Treasury markets and long term fixed rate mortgage stability.
If investors begin to question the quality of the collateral backing those bonds, confidence weakens. When confidence weakens, pricing shifts.
When pricing shifts, mortgage rates rise and liquidity tightens. That is the real risk they are guarding against. That is their reasoning for stricter analysis of warrantability.
So when Fannie sees something like an adjusted cost replacement roof endorsement anywhere inside a condo project, they are not analyzing whether that particular roof is about to fail.
They are reading it as a signal. Ding 🛎️ 🛎️🛎️
An aging structural component not insured at full replacement cost signals potential deferred maintenance, potential reserve strain, and potential special assessments.
Special assessments create borrower stress. Borrower stress creates default risk. Default risk affects bond performance.
In my specific case there is likely no real loss exposure to Fannie. The building itself may be sound. The total insured value may equal full replacement cost.
There may be no structural danger at all. But their system does not evaluate nuance at the building level.
It evaluates compliance at the project level. Either the structural components are fully insured at replacement cost or they are not.
This is not about old or new shingles preventing another Surfside. It is about eliminating ambiguity inside a trillion dollar mortgage machine. Bigger picture to show investors everything is a solid reliable investment.
That is the scale they operate on now ever since that issue in Florida condo collapse.
And when you understand that scale, even if you disagree with the rigidity, as I did when we had to walk away from buying and move on to another unit that was in a warrantable section, the reaction and decision of Fannie makes more sense.
Below is my blog of what happened recently in case you are curious if you live in a NJ condo, for those of you who still like to read and have your attention span I applaud you! ☺️
Let’s talk about what really happened to condos after 2021, because most people still don’t understand why deals are suddenly dying. In June 2021, the tragedy at the Champlain Towers South in Surfside, Florida changed everything. It exposed: • Deferred maintenance • Underfunded reserves • ...
