Lender Blacklist Finally Available to Co-op and Condo Boards

Last spring, a Massachusetts lawyer named Edmund Allcock launched a campaign to persuade the federal lending giants Fannie Mae and Freddie Mac to make public a secret blacklist of more than 1,700 co-ops and condos whose loans they would not back. Allcock, a founding partner at the law firm Allcock & Marcus, told Habitat at the time: “I know the blacklist exists because I’m looking at it on my computer screen. 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.’”

In a major reversal, Brick Underground reports, Fannie and Freddie have agreed to identify buildings they've designated as off-limits to lenders — a list that has swelled to 2,400 properties nationwide — give the reasons why they're on the list, and make the information available to the boards of co-ops, condos and homeowners' associations.

Stephen Markus, Allcock's law partner, says it's a "good thing" that Fannie and Freddie are making the blacklist available to boards but not going public with it — which could harm real estate values.

The blacklist is the result of tighter lending rules in the wake of the deadly condominium collapse in Surfside, Fla., in 2021, which resulted from deferred maintenance. The guidelines block loans to properties that have structural problems; inadequate insurance coverage or reserve funds; too many units owned by a single entity or a commercial enterprise; too many transient residents; and/or ongoing litigation.

By the end of February, co-op and condo boards should be able to look up their building and have an interactive process with Fannie and Freddie, Marcus says, as well as an appeals mechanism. In the meantime, the law firm's website provides free searches that reveal if a building is on the blacklist.

Fannie's and Freddie's recent reversal is a welcome step for transparency, according to Orest Tomaselli, the president of the project approval division at CondoTek, which provides data on condos for lenders, and the CEO and president of Strategic Inspections, which conducts co-op and condo reserve studies. He estimates about 66 New York City condo and co-op buildings are currently on the unavailable-for-lending list.

The added transparency will drive home the importance of boards getting into compliance with the lending guidelines, which will ultimately benefit owners looking to sell their apartments. Some boards, Tomaselli says, are stuck in old ways of funding critical building repairs by relying on assessments instead of shoring up their reserve funds or doing reserve studies, which the federal agencies require in order to approve lending.

He adds that it has been "a battle" to get boards to understand the new lending landscape.