Housing groups push FHFA to delay, revise GSE condo loan changes

Three housing organizations sent a letter this week to leaders at Fannie Mae, Freddie Mac and their regulator, the Federal Housing Finance Agency (FHFA), regarding pending changes to condominium lending rules through the government-sponsored enterprises (GSEs).

On July 8, the Community Home Lenders of America (CHLA), the Community Associations Institute (CAI) and the National Association of Mortgage Brokers (NAMB) told federal housing officials that they have “significant concerns” about affordability, access and inventory as they relate to the GSEs’ condo policy changes announced in March.

The letter, dated July 8, was addressed to FHFA Director Bill Pulte, Fannie Mae acting CEO Peter Akwaboah and Freddie Mac CEO Kenny Smith.

The letter addressed the role of community associations in the housing market, stating that they aren’t a “niche segment.” The groups cited 2025 data from the Foundation for Community Association Research showing that roughly 35% of the nation’s housing is located in a community association — including planned communities, condo associations and co-ops. About 78 million people live in the 373,000 community associations in the U.S.

“For many first-time buyers, moderate-income households, seniors and buyers in higher-cost markets, condominiums remain one of the most attainable paths to homeownership,” the groups said.

Higher costs, lower participation

CHLA, CAI and NAMB wrote that while they support “thoughtful efforts” to build financial resilience across condo communities, they believe the “scope, pace and operational impact” of the changes could unintentionally raise costs for borrowers and associations alike. They could also disincentivize lender participate in GSE condo loan programs while limiting credit availability for “otherwise qualified purchasers and financially stable communities.”

The groups cited the pending elimination of limited reviews in favor of full reviews — a change that’s set to take effect Aug. 3. Historically, many condo projects have qualified for streamlined treatments. But full reviews across the board are likely to increase documentation requirements, third-party review costs and processing times, they said.

“These operational burdens will fall on lenders, community managers, volunteer boards and homeowners, and the added costs will ultimately be borne by consumers,” the groups wrote, estimating that some borrowers could pay more than $1,000 in additional costs for a full review.

The letter also argued that raising required condo project reserves from 10% to 15% — a change that goes into effect Jan. 4, 2027 — will push monthly association dues higher while creating the need for additional special assessments and increased insurance costs. The groups say that while “reserve adequacy is important,” across-the-board increases are excessive as they don’t account for different risk profiles among condo projects.

Similarly, the increase in required condominium project reserves from 10% to 15% will lead to higher HOA fees, additional special assessments and increased insurance costs. While reserve adequacy is important, a uniform increase applied across widely varying project types may reduce affordability for current owners and prospective purchasers without fully accounting for differing project risk profiles.

The letter went on to say there is “continuing ambiguity” tied to the definition and application of “critical repairs” for condo projects. “Lenders have reported instances where performing loans were subjected to repurchase demands involving relatively minor repair items that appeared unrelated to material safety or structural concerns. Greater clarity and consistency would improve lender confidence and reduce unnecessary costs while preserving prudent risk management,” the groups explained.

Lastly, the groups believe that smaller lenders will have a “competitive disadvantage” as limited access to condo project eligibility creates friction. “As full condo reviews become mandatory, broader access to project status information becomes increasingly important for efficient market functioning — otherwise key stakeholders are shut out of direct access to condo project eligibility status information,” they said.

Suggested improvements

The letter encouraged the FHFA and GSEs to consider multiple options that could “preserve affordability and access while maintaining strong safety and soundness standards.”

First, the agencies could offer temporary underwriting exceptions that would speed reviews on transactions with lower risk factors. These include mortgages with strong borrower credit profiles and lower loan-to-value ratios, as well as projects that have a demonstrated history of financial health.

The CHLA, CAI and NAMB also called for delaying the implementation of the new reserve study funding standards and related reserve funding requirements for at least a year beyond the current effective date of Jan. 4, 2027. That idea was also recently mentioned by Mat Ishbia, chairman and CEO of United Wholesale Mortgage (UWM) — the nation’s largest lender.

“Overall, the industry is saying, ‘We understand what you’re trying to do, but we’ve got to delay this because it’s going to cause a major disruption in the condo market,’” Ishbia said.

The groups want to “clarify and standardize” the definitions of critical repairs and thresholds for loan repurchases as they seek to ensure enforcement is commensurate with actual transaction risk. They also wish to reevaluate the need for a single underwriting standard across all types of condo projects. For example, they say that an oceanfront high-rise carries more risk than a garden-style property in the Midwest, but both are subject to the same underwriting burdens.

The letter seeks “greater alignment” between the GSEs and the Federal Housing Administration (FHA) to share condo project eligibility details. This would reduce duplicative reviews and inconsistencies while removing unnecessary costs from the process, the groups say.

“A one-year delay and collaborative review would avoid potential market disruption, allow time to develop more flexibilities with clearer implementation guidance and prevent the problems that would otherwise arise in market adjustment to the policies,” the groups concluded.

“We fully support policies that protect taxpayers, strengthen collateral quality and promote long-term market stability. We believe these objectives can be achieved while also preserving access to one of the nation’s most affordable forms of homeownership.”