Housing Groups Urge FHFA to Revise GSE Condo Loan Rules

Three prominent housing organizations sent a letter on July 8 to leaders at Fannie Mae, Freddie Mac, and their regulator, the Federal Housing Finance Agency (FHFA), expressing "significant concerns" about upcoming changes to condominium lending rules. The Community Home Lenders of America (CHLA), the Community Associations Institute (CAI), and the National Association of Mortgage Brokers (NAMB) stated that the proposed policy changes, announced in March, could negatively impact affordability, access, and inventory in the housing market.

The organizations highlighted the substantial role of community associations in the U.S. housing landscape, noting that approximately 35% of the nation's housing is located within such associations, housing about 78 million people across 373,000 communities. They emphasized that condominiums represent a crucial and often the most attainable path to homeownership for various buyer demographics, including first-time buyers, moderate-income households, seniors, and those in high-cost areas.

While acknowledging support for efforts to enhance financial resilience within condo communities, the CHLA, CAI, and NAMB voiced apprehension regarding the "scope, pace, and operational impact" of the FHFA's planned changes. They warned that these modifications could inadvertently increase costs for both borrowers and associations. Furthermore, the groups anticipate that the changes might discourage lenders from participating in GSE condo loan programs, thereby restricting credit availability for qualified purchasers and financially stable communities.

Specific concerns were raised about the pending elimination of limited reviews in favor of full reviews, a change scheduled to take effect on August 3. The letter, addressed to FHFA Director Bill Pulte, Fannie Mae acting CEO Peter Akwaboah, and Freddie Mac CEO Kenny Smith, urged federal housing officials to delay and revise these forthcoming GSE condo policy changes to mitigate potential adverse effects on the housing market.