Key facts
- NAMB requested a 12-month delay for new Fannie Mae and Freddie Mac condo rules.
- The rules aim to strengthen condo safety and financial health.
- Fannie Mae's Limited Review process is set to be retired on August 3.
- Required reserve funding for condo associations will increase from 10% to 15% by January 4, 2027.
- NAMB warns the changes could reduce credit access and depress condominium market values.
The National Association of Mortgage Brokers (NAMB) is urging the Federal Housing Finance Agency (FHFA) to postpone new condominium project and property insurance standards for Fannie Mae and Freddie Mac by at least one year. The trade group expressed concerns in a June 15 letter that the current implementation timeline, slated to begin in August, could lead to many condominium projects being classified as non-warrantable and significantly restrict access to conventional financing.
The proposed rules, which aim to enhance condo safety and financial stability following notable structural failures, include retiring Fannie Mae’s Limited Review process on August 3. Additionally, the required reserve funding levels for condominium associations are set to increase from 10% to 15% by January 4, 2027.
NAMB President Kimber White emphasized that the association is not opposing the policy's objectives but is seeking a realistic transition period. This, she stated, would allow the industry to adapt to the new requirements without negatively impacting the borrowers and communities the policy is intended to benefit. NAMB warned that without adequate time, the immediate consequence would be a reduction in credit availability and a decline in condominium market values, which runs counter to the administration's stated goals of affordability and increasing housing supply.
Specifically, NAMB noted that the elimination of the Limited Review process would reclassify a substantial number of existing projects as non-warrantable, thereby shrinking the buyer pool, increasing borrowing costs, and reducing lender participation. The group also pointed out that many associations currently do not meet the 10% reserve funding minimum, and the jump to 15% by 2027 could necessitate significant increases in dues or special assessments, placing a burden on owners with fixed or moderate incomes. NAMB advocates for aligning the higher reserve requirement with the annual budget cycles of these associations.
Furthermore, NAMB expressed concern that mandating a universal Full Review for every transaction would substantially increase the required documentation, including budgets, reserve studies, delinquency data, and meeting minutes. This would lead to longer closing timelines and a higher rate of transaction fallout. The rolling, multi-date schedule also creates uncertainty, as a condo's qualification status could change between seasons based on reserves or documentation, impacting buyers under contract and real estate professionals.
To address these issues, NAMB proposed preserving a simplified review option for established, sound projects, phasing in expanded documentation and Full Review requirements through clear guidance and a single compliance date, and establishing a formal process to monitor market impacts before further tightening measures are implemented.