Non-Warrantable Condos, the Fannie/Freddie “Do-Not-Lend” Lists, and What It Means for Chicago Condo Owners

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Across the United States—and increasingly in Chicago—condominium financing has become more complicated. Buyers, sellers, and building associations are encountering a growing issue: non-warrantable condos and buildings appearing on lending restriction lists maintained by major mortgage agencies.

These changes stem largely from new lending scrutiny following the tragic collapse of Champlain Towers South in Surfside, Florida in 2021. In response, government-backed mortgage entities Fannie Mae and Freddie Mac tightened requirements for condominium buildings nationwide.

The result is that many condo buildings—particularly older high-rises with deferred maintenance—are becoming difficult or impossible to finance using conventional loans.

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What Is a “Warrantable” Condo?

A warrantable condo is a condominium unit located in a building that meets the lending standards required by Fannie Mae and Freddie Mac. When a building is warrantable, buyers can obtain conventional mortgages that are widely available, competitively priced, and easier to qualify for.

To be considered warrantable, condo buildings generally must meet several criteria, including:

Financial Health

• Adequate reserve funds in the association budget
• Reasonable percentage of owner-occupancy
• No excessive delinquency in HOA dues

Insurance Requirements

• Proper building insurance coverage
• Compliance with structural safety standards

Operational Standards

• No active litigation affecting structural integrity
• Balanced ownership (not overly investor-heavy)

When these standards are met, lenders can easily sell the loan on the secondary mortgage market through Fannie or Freddie, which keeps borrowing costs lower.

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What Is a Non-Warrantable Condo?

A non-warrantable condo is a unit in a building that does not meet these lending standards.

This doesn’t mean the unit itself is problematic—but rather that the building’s finances, maintenance, or ownership structure raises risk concerns for lenders.

Common reasons buildings become non-warrantable include:

• Low HOA reserves
• High percentage of investor-owned units
• Pending structural repairs
• Active litigation involving the association
• Deferred maintenance
• Large special assessments
• Structural inspection concerns

When a building is non-warrantable, many lenders will not provide conventional mortgages. Buyers may need:

• Portfolio loans from local banks
• Higher down payments (often 20–30%+)
• Higher interest rates

This significantly reduces the buyer pool, which can impact resale values.

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The Fannie Mae “Unavailable” or Do-Not-Lend List

After the Surfside collapse, Fannie Mae implemented a new risk-tracking system for condominium buildings.

Buildings may be placed on what lenders informally call the “do-not-lend list” or “unavailable list.”

This list includes buildings where lenders have identified issues such as:

• Structural safety concerns
• Deferred maintenance
• Insufficient reserves for major repairs
• Large special assessments tied to structural work
• Ongoing engineering investigations

If a building appears on this list, lenders cannot sell mortgages secured by units in that building to Fannie Mae, making most conventional financing impossible.

Freddie Mac has implemented similar policies.

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Why This Is Becoming a Growing Issue

The Surfside collapse changed the lending environment dramatically.

Mortgage agencies now require lenders to verify whether a building has:

• Structural inspection reports
• Known concrete or facade issues
• Large deferred maintenance projects
• Significant unfunded repairs

Many associations across the country—especially those built between the 1960s and 1990s—were operating with low reserves and postponed repairs.

What used to be normal budgeting practices are now being scrutinized much more aggressively.

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Chicago’s Condo Market and Deferred Maintenance

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In Chicago, this issue is particularly relevant due to the large number of aging condominium buildings.

Many high-rise buildings constructed between the 1960s and 1980s now face:

• Facade restoration
• Balcony repairs
• Window replacement
• Plumbing modernization
• Elevator upgrades

These projects can cost millions of dollars.

Historically, some associations avoided raising assessments or building reserves aggressively, instead delaying repairs until they became urgent.

Today, that approach can create serious financing consequences.

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Deferred Maintenance vs Preventative Maintenance

A key distinction in building health is the difference between deferred maintenance and preventative maintenance.

Deferred Maintenance

This occurs when buildings delay necessary repairs due to budget constraints or homeowner resistance to higher assessments.

Examples include:

• Postponed facade work
• Ignoring water infiltration issues
• Underfunded reserves
• Aging mechanical systems not replaced on schedule

Over time, these delays compound into larger structural issues and expensive emergency repairs.

Preventative Maintenance

Healthier associations instead prioritize long-term planning.

This includes:

• Reserve studies every few years
• Gradual reserve funding increases
• Proactive repairs before problems worsen
• Long-term capital improvement planning

Buildings that follow this approach are far less likely to face financing restrictions.

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How This Impacts Buyers and Sellers

For buyers, purchasing in a non-warrantable building can mean:

• Limited financing options
• Higher interest rates
• Larger required down payments

For sellers, the consequences can include:

• Fewer qualified buyers
• Longer market times
• Potentially lower sale prices

In competitive urban markets like Chicago, where condos make up a large share of the housing stock, these lending restrictions are becoming an important factor in property values.

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What Condo Associations Should Do Now

Experts increasingly recommend that associations take proactive steps to avoid lending issues:

1. Conduct Regular Reserve Studies
Professional reserve studies help determine how much money should be saved for future repairs.

2. Increase Reserve Contributions
Many associations historically underfund reserves. Gradual increases can help stabilize building finances.

3. Address Structural Repairs Early
Waiting until repairs become urgent increases both costs and lending risk.

4. Improve Financial Transparency
Detailed financial records, engineering reports, and capital plans help reassure lenders and buyers.

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The Future of Condo Lending

The changes implemented after the Surfside tragedy are likely here to stay.

Lenders and federal mortgage agencies are increasingly focused on building safety, financial stability, and long-term maintenance planning.

For cities with large condo inventories like Chicago, this means associations, owners, and buyers must pay closer attention to the health of the building itself—not just the unit inside it.

Buildings that prioritize preventative maintenance and strong reserves will remain attractive and financeable, while those with deferred maintenance may face growing challenges in the years ahead.