Homeowners Stuck! A Secret Mortgage Blacklist Is Making California Condos Unsellable

A growing number of condominiums in the state have landed on a secretive federal blacklist maintained by Fannie Mae, a government-backed mortgage giant. The list, which is not publicly available, flags certain condo complexes as ineligible for traditional home loans, effectively killing most sales.

In the past two years, the number of blacklisted condos in California has skyrocketed. In 2023, there were about 170 buildings on the list. Today, that number has ballooned to over 730, leaving thousands of homeowners stuck with properties they can’t sell.

Why Are These Condos Being Blacklisted?

Fannie Mae’s list includes condo developments that don’t meet their strict loan standards. Complexes can be flagged for several reasons, including:

• Not having enough insurance coverage

• Structural safety concerns or deferred maintenance

• Financial instability within the homeowners association (HOA)

Once a condo appears on the list, buyers are unable to get traditional mortgages for those units, forcing them to look for alternative loans with higher interest rates or walk away from the purchase altogether.

A Real-Life Example: The Shadow Ridge Disaster

The impact of this blacklist has already hit homeowners hard. Take the Shadow Ridge complex in Ventura County, which was recently flagged by Fannie Mae.

In December, Shadow Ridge’s insurance policy no longer met Fannie Mae’s requirements, causing the entire development to be blacklisted. The result? Pending sales collapsed overnight. Buyers who were about to close on condos had their mortgage approvals revoked, and current owners were left in limbo.

According to the complex’s board members, fixing the issue isn’t easy. Finding an insurance policy that meets Fannie Mae’s standards would increase costs tenfold, making it unaffordable for most residents.

How This Is Hurting the California Real Estate Market

This growing issue is affecting more than just homeowners—it’s shaking up the entire condo market.

• Harder to Sell – Buyers can’t secure loans, so sales stall.

• Plummeting Property Values – With fewer buyers, property values in these buildings are dropping.

• Higher Costs for Owners – HOAs struggle to meet stricter insurance and maintenance demands, leading to increased fees for residents.

What Can Homeowners and Buyers Do?

If you’re a condo owner or thinking about buying one, here’s how to protect yourself:

1. Check Before You Buy – Ask lenders if a condo is on Fannie Mae’s ineligible list. Since the list isn’t public, only mortgage professionals can verify it.

2. Review the HOA’s Finances – Make sure the building has a healthy reserve fund and meets insurance requirements.

3. Seek Alternative Financing – If a building is blacklisted, some non-traditional lenders may still offer loans, though at higher interest rates.

Real estate experts and industry leaders are calling on Fannie Mae for more transparency and fairer standards, as the list continues growing and leaving homeowners stranded.

For now, buyers and sellers should stay informed and take extra precautions before making condo transactions. One thing is certain, if your home lands on Fannie Mae’s naughty list, getting out won’t be easy.