Coalition escalates calls for delay on Fannie, Freddie condo rules

The Community Home Lenders of America, Community Associations Institute and National Association of Mortgage Brokers doubled down on their previous pushes for more time to meet deadlines for certain condominium loan rule changes in a joint letter.

These groups reinforced calls for a year's delay in some restrictions in the letter sent to the regulator of Fannie Mae and Freddie Mac, Federal Housing Finance Agency Director Bill Pulte, who has said he wants to keep the adjustments aimed at balancing access with a need for risk management and a level playing field on track.

FHFA recently responded to a past request for a delay with a statement saying that the government-sponsored enterprises will be "implementing their new policies on time so that more Americans can afford to buy a home and everyone's financial security is protected."

The coalition said it supports FHFA's need to balance homeownership access with safety and soundness in the agency's recent mix of tighter and looser rules, but added that it worries some unintended, negative consequences may occur if certain steps are rushed.

Rushed implementation "may unintentionally raise costs for borrowers and existing owners, reduce lender participation, and limited financing availability for otherwise qualified purchasers and financially stable communities," the groups said in their letter.

The coalition's concerns

Insufficient time to gear up for restrictions made by the influential loan buyers could challenge a growing number of community associations that currently represent more than one-third or 35.2% of the housing market, CAI notes in the letter, citing data from its research foundation.

The number of community associations in the U.S. market has grown steadily over time, according to CAI. Between 2010 and 2025, the number grew from 311,600 communities to 373,000 and the number is estimated to grow to 374,000-377,000 this year, according to the Foundation for Community Association Research. Condos typically represent around 35 to 40% of these communities. Homeowners associations or cooperatives account for the rest. GSE rules for these different community types tend to generally be somewhat similar.

In addition to stressing the size of the market potentially affected, the groups calling for GSE rule tweaks also echoed broader industry pushback around ending what Fannie and Freddie respectively call limited or streamlined reviews, and the addition of tighter reserve requirements.

The organizations additionally called for the FHFA make changes to other aspects of the rules that they predicted could otherwise impede the condo market, such as:

• allowing exception processing for originations deemed to be less risky based on underwriting criteria or performance that would ease the transition away from limited or streamlined reviews,

• providing standards around defining critical repairs and loan repurchase criteria in such a way that "enforcement is proportionate to actual risk,"

• aligning GSE and Federal Housing Administration procedures "to reduce duplicative reviews and inconsistencies," and

• making underwriting more flexible based on the project type such that a building like a "Midwest garden apartment style condo" would be differentiated from "an oceanfront highrise."
  

However, the FHFA has looked to promote some standardization in rules and end limited and streamlined reviews to create a level playing field among states with different property types.
Rep. Byron Donalds, R-Fla., has welcomed an end to the exception process, saying it has put his state at a disadvantage relative to others.

Donalds said in a March press release that he welcomed "decisive action to ensure prospective condo owners in Florida are subject to the same terms and conditions as the rest of the nation" by ending streamlined and limited reviews.