Fannie Mae and Freddie Mac will implement stricter condo lending standards beginning Aug. 3. The changes require lenders to conduct more comprehensive reviews of condominium associations’ financial health, reserve funding, insurance coverage, and building conditions before mortgages can qualify for purchase or guarantee by the government-sponsored enterprises.
Approximately 40% of condo purchases involving mortgages have utilized a limited or streamlined review process. Under the new policies, many of these transactions will require a full review instead, eliminating the expedited pathway that previously existed for certain projects. This shift is expected to lengthen mortgage approval timelines and increase manual review work from lenders, condo associations, and other parties involved in the transaction process. Lenders and industry groups have expressed concern about potential delays and possible mortgage denials if buildings fail to meet the updated standards.
The new regulations stem from heightened scrutiny of condo financing and building safety standards following the Champlain Towers South collapse in Surfside, Florida on June 24, 2021. That disaster killed 98 people and prompted Fannie Mae and Freddie Mac to implement temporary restrictions on problematic condo projects, which were largely made permanent in 2023. The latest changes continue this trend of tightening underwriting requirements.
Industry experts note that condominium purchases remain significantly more affordable than single-family homes, with a median price of $380,000 compared to $446,400 for single-family residences. However, stricter lending standards could impact accessibility. While some lenders may retain loans in their own portfolios rather than selling to Fannie or Freddie, this option typically comes with higher costs to borrowers. Once a condo project passes a full review, lenders generally will not need to repeat the process for subsequent mortgages on the same property.
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