CHLA, CAI, and NAMB warn that new Fannie and Freddie condo policies threaten buyer affordability and market access
A coalition of lending, brokerage, and housing stakeholders fired off a letter to Federal Housing Finance Agency (FHFA) Director William J. Pulte on July 8, warning that sweeping new condominium underwriting changes from Fannie Mae and Freddie Mac risk pricing out the very buyers the government-sponsored enterprises (GSEs) are designed to serve.
The Community Home Lenders of America (CHLA), the Community Associations Institute (CAI), and the National Association of Mortgage Brokers (NAMB) co-signed the letter, calling on FHFA to delay, modify, or create exemptions for several recent policy changes.
That includes the elimination of streamlined limited reviews, increased reserve funding requirements, and new reserve study implementation expectations for condo projects.
More than one-third of all US housing, or 35.2%, sits within community associations, according to the Foundation for Community Association Research's 2025 Statistical Review, which tallies 373,000 community associations housing 78.1 million residents nationwide.
For first-time buyers, moderate-income households, seniors, and buyers in higher-cost markets, the letter said, condominiums remain "one of the most attainable paths to homeownership."
Limited review elimination raises lender and borrower costs
At the center of the coalition's concerns is the retirement of the limited review process, mandatory for all loan applications dated August 3, or later under Fannie Mae's Lender Letter LL-2026-03 and a coordinated Freddie Mac bulletin.
Under the previous framework, borrowers with strong credit profiles and larger down payments could secure condo financing through a streamlined assessment.
After August 3, even those transactions require a comprehensive full review covering a project's financials, reserve funding, litigation history, insurance, and inspection records — generating what the letter described as "increasing documentation burdens, third-party review expenses, lender questionnaire demands, and processing times."
In some cases, borrowers could face well over $1,000 in additional transaction costs, the letter stated, with smaller community lenders absorbing operational burdens that place them at a competitive disadvantage relative to larger institutions.
NAMB president Kimber White has been among the most vocal critics of the FHFA's condo policy rollout. Speaking to Mortgage Professional America in March 2026, White — a Florida-based broker for whom condo loans represent more than 50% of his business — offered a stark assessment.
"I give them a B-minus for efforts and an F for implementation," he said.
"The full condo review is going to absolutely show that there are not 10% reserves, which automatically is going to throw all these condos out of being able to qualify."
White also flagged the compressed timeline surrounding the January 4, 2027 reserve requirement increase, which raises the minimum reserve funding threshold from 10% to 15% of a project's total annual assessment income.
"Lenders will start enforcing that in December because they have to deliver that in January," he said.
Separately, Fannie and Freddie's recent easing of condo master-policy insurance requirements was welcomed by the industry as a constructive step, though the coalition letter made clear that improvements in one area do not offset the operational and affordability pressures created by the review and reserve changes.
Coalition calls for a delay and phased approach
The coalition is not asking FHFA to abandon its safety-and-soundness objectives. The letter outlines nine specific recommendations, including:
- Temporary underwriting variances for lower-risk condo transactions
- A minimum one-year delay of the January 4, 2027 reserve study implementation deadline
- Standardized definitions for "critical repairs" to reduce inconsistency in repurchase demands
- An end to repurchase demands on performing loans over minor repair items unrelated to material safety concerns
The groups also called for expanded access to Fannie Mae's Condo Project Manager eligibility data, broader GSE and Federal Housing Administration (FHA) alignment to reduce duplicative reviews, and a reevaluation of loan-level price adjustments to ensure pricing reflects actual risk.
The coalition's deeper concern is the uniformity of the current framework: an oceanfront high-rise and a midwestern garden-style apartment complex face identical underwriting treatment despite materially different risk profiles.
The Florida condo market has borne a disproportionate share of GSE eligibility pressure, and the groups argue the new rules compound that regional stress.
A one-year delay, the coalition concluded, would allow FHFA, the GSEs, associations, and lenders to develop a more nuanced, risk-sensitive framework, preserving the policy's safety rationale without triggering unnecessary market disruption.
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