Summary of WSJ “What’s News” Podcast Episode: “How a Secret Mortgage Blacklist Is Making It Hard for Condo Owners to Sell”

Release Date: March 17, 2025
Host: The Wall Street Journal

Introduction

In this episode of the Wall Street Journal's "What's News," the focus is on a largely concealed mortgage blacklist maintained by Fannie Mae and its profound impact on condo owners across the United States. The discussion delves into how this blacklist is making it increasingly difficult for condo owners to sell their properties, the factors contributing to properties being listed, and the broader implications for the real estate market.

1. Understanding the Mortgage Blacklist

The episode opens with an exploration of the so-called mortgage blacklist, a database maintained by Fannie Mae that includes condo developments failing to meet the company's stringent lending criteria. Contrary to being a "blacklist," Fannie Mae clarifies that this is simply a compilation of properties that either do or do not meet their standards.

Stephen Marcus, Condo Lawyer: "The number of properties that failed to meet Fannie Mae's standards increased from a few hundred developments in 2021 to more than 5,000 this month." [05:41]

2. Expansion of the Blacklist

The blacklist has seen a significant expansion over recent years. Starting with a modest number of a few hundred condominium developments in 2021, the list has swelled to over 5,000 properties by March 2025. This dramatic increase poses severe challenges for condo owners seeking to sell their units.

3. Criteria for Blacklisting

Several factors can lead to a property being placed on Fannie Mae's list:

• Structural and Safety Issues: Properties with safety concerns or structural deficiencies are prime candidates.

• Financial Instability: Insufficient cash reserves and financial mismanagement can result in blacklisting.

• Insurance Coverage Problems: Increasingly, inadequate insurance coverage is a critical issue. Fannie Mae and Freddie Mac require certain insurance standards, and properties failing to meet these are scrutinized.

Jean Eaglesham, WSJ Insurance Reporter: "The issues with a property that can make them blacklisted include structural issues such as safety concerns, but also financial issues like cash reserves. And increasingly, in recent years, a bigger and bigger problem is insurance." [05:41]

4. Impact on Condo Owners and the Real Estate Market

Being on the blacklist severely hampers a condo owner's ability to sell their property. Standard mortgage loans become inaccessible, forcing buyers to seek alternative financing that is often more expensive or requires larger down payments. This scenario leads to stalled sales and reduced property values.

Jean Eaglesham: "If they look to get an insurance policy that does meet Fannie Mae's standards, in some cases the rate that's being asked for that is unaffordable." [07:15]

5. Contributing Factors to the Blacklist Surge

Several key developments have contributed to the increased number of blacklisted properties:

• Regulatory Changes Post-Surfside Collapse: The tragic Surfside condominium collapse in Florida in 2021 prompted stricter safety laws, leading Fannie Mae to enforce their requirements more rigorously.

Jean Eaglesham: "After the Surfside collapse in Florida... Fannie tightened up their enforcement of their existing requirements." [07:25]

• Insurance Market Strain: The property insurance market has become increasingly volatile, with insurers raising premiums and reducing coverage. This trend is especially pronounced in disaster-prone areas, further complicating condo owners' ability to secure adequate insurance.

Alex Sosale: "We're seeing these developments particularly in areas of high risk, so disaster-prone areas where the insurers are pushing up the cost of insurance quite dramatically and also cutting the coverage." [06:39]

6. Fannie Mae and Freddie Mac’s Stance

Both Fannie Mae and Freddie Mac maintain that their databases are not blacklists but rather lists of properties meeting specific lending criteria. They argue that these measures are essential for maintaining financial stability and mitigating risks in the mortgage market.

Greg Zuckerman: "Freddie doesn't maintain a list of condo developments that don't meet its criteria." [06:29]

7. Geographic and Market Implications

The blacklist predominantly affects condominiums in high-risk, disaster-prone regions where insurance costs have surged. This geographic concentration exacerbates market instability in these areas, leading to decreased liquidity and falling property values.

8. Broader Economic and Social Implications

The growing blacklist reflects broader economic challenges, including increasing insurance costs and stricter regulatory environments. Additionally, it underscores the interconnectedness of real estate markets, financial institutions, and regulatory bodies in shaping property markets.

9. Conclusion

The episode highlights a critical issue facing condo owners today—the difficulty of selling properties due to stringent mortgage lending criteria enforced by Fannie Mae. With the blacklist expanding rapidly, many homeowners find themselves trapped with unsellable condos, exacerbating financial and market tensions. The discussion underscores the need for a balanced approach that ensures financial stability without unduly burdening property owners.

Notable Quotes

• Jean Eaglesham: "The market is sending a message that we should be nervous about the outlook for the future of the economy." [03:44]

• Alex Sosale: "If they look to get an insurance policy that does meet Fannie's standards, in some cases the rate that's being asked for that is unaffordable." [07:15]

• Jean Eaglesham: "After the Surfside collapse in Florida... Fannie tightened up their enforcement of their existing requirements." [07:25]

This comprehensive summary encapsulates the key discussions and insights from the podcast episode, providing a clear understanding of how Fannie Mae's mortgage blacklist is impacting condo owners and the broader real estate market.