A non-warrantable condo with Fannie Mae, the government entity that securitizes mortgages, is one that does not meet the guidelines for financing eligibility. The condominium complex as a whole is not warrantable, meaning that lenders see it as a high-risk property and one less likely to maintain future value. The official title for Fannie Mae is the Federal National Mortgage Association.
Several factors determine whether a condominium complex is warrantable by Fannie Mae. These include a high percentage of owner-occupied units, at least 90 percent of units being occupied in established or existing projects, 70 percent pre-sold units in new or newly converted units, and a maximum of 15 percent of units being 30 days or more delinquent on HOA dues. Additionally, no more than 10 percent of a complex can be owned by a single person or entity, and no more than 20 percent of the units can be used for non-residential space.
The Homeowners Association must reserve at least 10 percent of its budget for replacement projects. If any of these conditions do not exist, the complex becomes non-warrantable with Fannie Mae. The same standards typically apply equally to Freddie Mac, the other government lending warrantor. Both Fannie Mae and Freddie Mac occasionally offer exceptions to the eligibility requirements, based on special circumstance or market conditions.