CONDO OWNERSHIP
From Listings to Living
The appraisal came in at contract price. The borrower had a 760 score and eleven months of reserves. The file still collapsed on day 18, when the management company returned the project questionnaire and it showed one LLC holding 31 of the building's 104 units.
Nothing was wrong with the buyer. The building failed. That is what a non warrantable condo is: a project that does not meet the standards Fannie Mae or Freddie Mac apply before they will buy the loan, which means most lenders will not make the loan in the first place. Your credit file is underwritten once. The project is underwritten too, separately, and it can fail on facts you had no way to see from the unit.
Leevli EditorialLast updated 2026-09-17
Warrantable is lender vocabulary, not a legal status. No agency stamps a building as warrantable and no registry publishes a list. The word describes a representation: when a lender sells your mortgage into the secondary market, it warrants to Fannie Mae or Freddie Mac that the project met the applicable eligibility rules on the day the loan closed. If the project did not, the lender can be forced to buy the loan back.
That is why a loan officer will get nervous about a building they have never heard of, and why they may already know a nearby tower is a problem. The repurchase risk sits with the lender. It still decides whether you get a conventional rate.
It also means warrantability is not permanent. A building can pass in March and fail in October because an insurer non-renewed, a contractor sued, or delinquencies drifted past a threshold. If you are trying to understand the ownership structure underneath all of this, start with what a condo legally is and what portion of it you own.
Fannie Mae publishes the disqualifying list in Selling Guide section B4-2.1-03, and it is more specific than most buyers expect. As of the August 5, 2026 edition, a condo project is ineligible if any of the following is true.
One person or entity may own no more than two units in a project of 5 to 20 units, and no more than 20% of the units in a project of 21 or more. Units subject to rental arrangements count toward the total. This is the rule that killed the deal in the opening paragraph, and it is the one buyers most often trip over in resort markets where a single sponsor kept a block of inventory.
The project is ineligible if the association receives more than 10% of its budgeted income from non-incidental business operations, such as a restaurant, a health club or a parking operation it runs commercially. Note the test is income share, not square footage.
Space used for nonresidential or commercial purposes may not exceed 35% of the project. Freddie Mac applies a related limit and treats very small projects separately: in its published guidance, a 2- to 4-unit project may contain one commercial unit, and a 5- to 10-unit project is held to no more than 35% commercial space.
A project managed or operated as a hotel or motel is ineligible even when the units are individually owned. So are projects with hotel characteristics such as daily cleaning services, or projects marketed as a hotel, motel, resort or investment opportunity. Condo-hotels in beach and ski markets fail here routinely, and no amount of borrower strength fixes it.
A project is ineligible when the association is named as a party to pending litigation that relates to safety, structural soundness or habitability. Minor matters within defined parameters are carved out. A small collections suit is not the same thing as a construction-defect action over the building envelope. What matters is the subject of the suit, not the dollar amount alone.
Projects with unaddressed critical repairs are ineligible, as are projects requiring repairs costing more than $10,000 per unit within 12 months. Freddie Mac's guidance is blunt about inspections: a project that failed a state, county or other jurisdictional mandatory inspection or certification specific to structural safety, soundness and habitability is ineligible until the repairs are finished and documented. Buildings in states that adopted milestone inspection regimes after the Champlain Towers South collapse land here more often than they used to. For context, see the broader insurance and reserve picture behind that shift.
The disqualifying list gets the attention. In practice, more deals die on two arithmetic tests inside the Full Review process.
Delinquency. No more than 15% of the total units in a project may be 60 days or more past due on common expense assessments. The same 15% ceiling applies to each special assessment, calculated separately. Freddie Mac publishes the identical threshold. In a 60-unit building, ten delinquent owners is the difference between a conventional loan and a phone call you do not want.
Reserves. The HOA budget must fund replacement reserves for capital expenditures and deferred maintenance at a level the lender verifies against budgeted assessment income. That floor is currently 10%, and it is going to 15%. The timing is below. Freddie Mac adds a point boards sometimes miss: special assessments cannot be used in place of the budgeted reserve allocation.
Both tests come off the same document you should be reading anyway. If a board has been holding dues artificially low, this is where it shows up, and it connects directly to what actually drives an association's monthly fee.
Fannie Mae issued Lender Letter LL-2026-03 on March 18, 2026, and the changes are the reason a condo that financed easily last year may not now.
Taken together, large buildings lost their shortcuts while very small ones got relief.
The Waiver of Project Review path deserves a note, because buyers and agents overread it. A waiver skips the project review. It does not suspend everything else. Even with a waiver, the project still cannot carry an "Unavailable" status in Fannie Mae's Condo Project Manager, the insurance requirements in the Selling Guide still apply, certain refinances still require that there be no unaddressed critical repairs and no evacuation order, and the project still cannot be terminating or in insolvency proceedings. Manufactured homes remain ineligible regardless of project type.
Detached condo units, 2- to 4-unit projects, and qualifying 5- to 10-unit projects are the usual waiver candidates.
When the agencies will not buy the loan, the loan has to be held. Portfolio and non-QM lenders do this. Regional banks, credit unions and private lenders price off their own balance sheet rather than the secondary market. Three things change, and none of them are set by a published rule.
Rate. Expect it to be higher than a conventional quote on the same file. How much higher varies by lender, by how the project fails, and by how deep that lender is in that market. A building that is non-warrantable only because of pending litigation is a different credit story than a condo-hotel, and good portfolio lenders price the difference.
Down payment. Portfolio programs commonly ask for more equity than the 3% to 5% floors available on agency loans. Ask for the specific minimum in writing before you go under contract, not after.
Liquidity, which outlasts your closing. If the building is non-warrantable when you buy, it is probably non-warrantable when you sell, and your buyer pool shrinks to cash buyers and portfolio borrowers. That is a real discount at resale, and it is why the status matters even to a buyer paying cash today. Most buyers solve the financing problem for themselves and then inherit the resale problem.
Non-warrantable under conventional rules does not always mean unfinanceable. FHA runs its own condominium project approval, on Form HUD-9992, covering owner-occupancy percentage, FHA insurance concentration, commercial and nonresidential space, units more than 60 days past due, pending litigation, and insurance including a liability minimum of $1 million for any single occurrence. FHA also offers a single-unit approval path for units in projects that are not FHA-approved, provided the project is complete and has at least five dwelling units.
On the conventional side, both agencies keep an exception lane. Fannie Mae's Project Eligibility Review Service exists for projects that merit special consideration but do not meet every requirement; lenders contact the Project Standards team to discuss it. Freddie Mac's Condo Project Advisor lets a lender request unit-level exceptions and get feedback on project compliance, and provides a form for projects carrying a not-eligible status or appealing one.
For a buyer, the move is procedural. Ask your lender to run the project through Condo Project Manager or Condo Project Advisor before you write the offer. It takes days, not weeks, and it is the cheapest contingency you will ever buy.
Most of the fixes belong to the board, and most of them are slow. If you own in a building that just failed, or you sit on the board, this is the order that tends to work.
Ask for the last two annual budgets and the current year-to-date financials, the most recent reserve study, the delinquency report by aging bucket, minutes for the past 12 months, any milestone or structural inspection report and its status, a disclosure of pending litigation, and the master insurance declarations page. The insurance side is its own review. What the association's master policy covers and how to read its declarations page tells you whether the building is carrying the coverage lenders require, and sizing your own HO-6 against that master policy tells you what you will owe on top.
Then ask the lender to run the project. If it comes back clean, you have a conventional rate and a liquid asset. If it does not, you now know what you are negotiating about, and you can decide whether the discount is big enough to accept a smaller buyer pool later. Comparing how buildings in the same submarket sit on this dimension is exactly the homework worth doing before an offer, whether you are looking at condo inventory in Miami or anywhere else with a lot of tall, young buildings. When you are ready to line up candidates, the units currently on Leevli are the place to start the comparison.
Lenders read the questionnaire. Owners in the building already lived through what it says.
Listings show the property, but they rarely explain the lived reality around it. On Leevli, a mover can explore the city, review neighborhood and building information, and ask a verified resident the specific questions that remain unanswered. That human layer helps readers know what to investigate before signing a lease, making an offer, or choosing between two addresses.
It is a condominium project that does not meet the eligibility rules Fannie Mae or Freddie Mac apply to the building itself. Because most lenders sell their loans into the secondary market, a project that fails those rules is a loan they cannot sell, so they usually decline to make it. The unit can be in perfect condition and the borrower can be well qualified.
A warrantable project passes the agency review, so the loan can be sold and priced at conventional terms. A non-warrantable project fails at least one requirement, which pushes the borrower toward a portfolio or non-QM lender at that lender's own terms. Nothing about the label is permanent or official. No agency stamps a building warrantable, and a project can change status between one loan and the next.
Selling Guide section B4-2.1-03 lists what makes a project ineligible. Nonresidential or commercial space above 35% of the project, non-incidental business income above 10% of the budget, hotel or motel operation, litigation over safety, structural soundness or habitability, unaddressed critical repairs, and repairs costing more than $10,000 per unit within 12 months all disqualify a building. Single-entity ownership caps apply on top of that list.
Yes, and the limits are specific. In a project of 5 to 20 units, one person or entity may own no more than two units. In a project of 21 units or more, the cap is 20% of the units. Units under rental arrangements count toward the total. Sponsor-held inventory in resort markets is the usual cause, and only sales by that owner fix it.
No more than 15% of the units in a project may be 60 days or more past due on common expense assessments, and the same ceiling applies separately to each special assessment. Freddie Mac uses the identical threshold. In a 60-unit building that is ten owners. Boards that let collections slide during a hard year often discover the problem only when a neighbor's sale stalls.
It can. Freddie Mac treats a project that failed a state, county or other jurisdictional inspection tied to structural safety, soundness or habitability as ineligible until the repairs are completed and documented. Which inspections exist depends entirely on the state, since milestone and structural reserve rules were adopted unevenly after 2021. Ask which regime applies where you are buying and where the building sits in that cycle.
Often yes, through a portfolio or non-QM lender that keeps the loan on its own balance sheet. Regional banks and credit unions active in a specific market are the usual source, and some price a litigation-only project very differently from a condo-hotel. FHA approval or single-unit approval can also be an option in projects that qualify, even when conventional rules say no.
Nobody publishes a premium, because these loans are priced lender by lender rather than by the secondary market. Expect a higher rate than a conventional quote on the same file and a larger down payment than the 3% to 5% floors agency loans allow. Get both in writing before you go under contract, and price the resale discount too, since the next buyer faces the same constraint.
Running a project through Condo Project Manager or Condo Project Advisor takes days once the lender has the documents. The slow part is the association. A management company can take a week or more to return the questionnaire, and a busy one can take longer. Ask for the check at pre-approval rather than after the inspection, so the answer arrives while you still have contingencies.
The work belongs to the board. Bring 60-day delinquencies under the threshold with consistent collections, fund reserves to the required share of budgeted income rather than leaning on special assessments, finish and document critical repairs, settle or properly characterize litigation, and unwind concentrated ownership as units sell. Then make sure the questionnaire is completed carefully, because a vague form fails projects that would otherwise pass.
Editorial review: verify current federal and state law, insurance regulations, HOA and condominium statutes, and lender guidelines before relying on any single claim. This article is informational and does not constitute legal, financial, tax or insurance advice.
