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Who’s on Fannie Mae’s Blacklist, and Why Should You Care?

Bill Morris in Legal/Financial on May 31, 2023

New York City

Fannie Mae blacklist, co-op and condo loans, Surfside condo collapse.
May 31, 2023

The federal government has denied the existence of a secret blacklist of more than 1,700 co-ops and condominiums whose loans it will not back — though a Massachusetts lawyer claims to have obtained a copy of the list.

“I know the blacklist exists because I’m looking at it on my computer screen,” says Massachusetts condo lawyer Edmund Allcock, founding partner at the law firm Allcock & Marcus. “It’s dated May 5, and it’s called ‘The Fannie Mae Unavailable List.’ Fannie Mae is providing this list to lenders and saying, ‘Don’t lend to these co-ops and condos.’”

Each property on the list is accompanied by the reason(s) it was put there. These include: structural problems; inadequate insurance coverage or reserve fund; too many units owned by a single entity or a commercial enterprise, too many transient residents; and ongoing litigation.

Allcock says the list is 350 pages long and contains 1,776 co-ops, condos and homeowners associations nationwide whose loans Fannie Mae won’t back. Between 40 and 50 of those properties are in New York State. According to Allcock, this is a result of the federal government’s tightening of loan requirements in the wake of the deadly condominium collapse in Surfside, Fla., in 2021.

Existence of such a list was first reported by a Florida newspaper, The Orange County Register. That report led Allcock to file Freedom of Information Act requests to Fannie Mae and the Federal Housing Finance Agency (FHFA), the conservator of the federal lending giants Fannie Mae and Freddie Mac since the financial meltdown of 2008.

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Fannie Mae did not respond to Allcock’s request. But in a letter dated May 23, 2023, the FHFA’s Office of the Inspector General told Allcock: “The FHFA-OIG has conducted a search (of OIG records) and has determined that it possesses no records responsive to your request.” The letter adds that Allcock has 90 days to appeal the decision, which he intends to do.

“I want to try to convince them to make the list public,” Allcock says. “If you’re on the list, it behooves the co-op or condo board to get off the list.”

Allcock adds that he acquired the list from a “second-hand” source who, he presumes, got it from a lender. “I’m not comfortable releasing the whole list,” he says. “I don’t want it to be used for the wrong reasons, like pointing fingers. I would like to see the government release it, so that if a building has problems, it can fix them. Also, it might be illegal that I have it.” 

The list is available only to lenders that have a contract with Fannie Mae, says Orest Tomaselli, president of project review at Condotek, a compliance service for lenders and co-op and condo boards. Lenders under contract with Fannie Mae, he adds, are required to sign a nondisclosure agreement barring them from revealing the list’s contents to the general public.  

While he prepares his appeal and his new Freedom of Information Act request, Allcock plans to reveal, on a selective basis, which properties are on the blacklist. “If someone can establish their relationship to a building — as a shareholder or board member or property manager — and they want to know if their building is on the list and why, I’ll tell them,” Allcock says. “The government should be releasing this information.”

If a property is on the blacklist, it will likely learn about it when applying for a loan from a lender who’s qualified to sell loans to Fannie Mae. Jerry Niemeier, a consultant who advises lenders, says that until the list is made public, lenders are where boards need to turn. “The lender can help you identify your problem,” he says. “Then, once you fix it, the lender will submit the loan to Fannie Mae.” 

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