Non-warrantable Florida condos: when conventional US financing is not available

Section 01What "warrantable" means and why it exists

In short. Fannie Mae and Freddie Mac are the two government-sponsored enterprises that buy and securitize roughly half of all US residential mortgages. They set project-level standards for condos. A condo whose building meets all of those standards is "warrantable"; a condo whose building fails any one of them is "non-warrantable" and cannot be financed with a conventional Fannie Mae or Freddie Mac mortgage.

Fannie Mae (Federal National Mortgage Association, FNMA) and Freddie Mac (Federal Home Loan Mortgage Corporation, FHLMC) do not lend money directly. They purchase mortgages from US banks and credit unions, package them into securities, and resell them. Because they bear the credit risk of those mortgages, they impose underwriting standards on the loans they buy: borrower credit, loan-to-value, debt-to-income, and on condos specifically, project-level standards.

The project-level test exists because condo unit values are inseparable from the condition and finances of the entire building. A defective borrower can be replaced; a defective building cannot. If the building has unfunded structural repairs, deferred maintenance, an underwater HOA, excessive litigation, an under-insured master policy, or a single owner controlling too many units, every individual unit's collateral value is impaired. Fannie Mae and Freddie Mac protect themselves and the mortgage market by refusing to buy loans on units in those buildings.

The same logic applies to FHA and VA loans, which run their own approved-condo lists and have similar project criteria. A building approved by Fannie Mae is not automatically approved by FHA, but the substantive tests overlap.

The practical consequence in Florida in 2026 is that warrantability has become a binary input to almost every condo purchase. A warrantable building gives the buyer access to 30-year fixed conventional mortgages at agency rates, FHA loans with low down payments, and standard refinancing options. A non-warrantable building forces the buyer into a much smaller financing pool: portfolio loans held by the originating bank, Non-QM loans (qualifying outside Consumer Financial Protection Bureau's Qualified Mortgage rule), DSCR loans (priced on the property's debt-service-coverage ratio for investors), or Foreign National loans for non-US borrowers. Rates on those alternatives in 2026 typically run 1.5 to 3 percentage points above conforming rates, with down payments of 25 to 40 percent.

Section 02The six tests that determine warrantability in 2026

In short. A Florida condo's warrantability turns on six tests under the Fannie Mae Selling Guide, as updated by Lender Letter LL-2026-03 issued March 18, 2026. The six tests cover reserve funding, delinquencies, single-entity ownership, presale, master insurance, and commercial space. Failure of any one disqualifies the entire building.

The Fannie Mae and Freddie Mac project standards run in parallel and have been progressively tightened since 2021. The current full-review framework is set by the Selling Guide section B4-2.2 and was substantially updated by Lender Letter LL-2026-03 (March 18, 2026), which raised reserve thresholds, retired the streamlined Limited Review path, and aligned Fannie Mae and Freddie Mac on insurance requirements. Freddie Mac issued matching guidance the same day in Bulletin 2026-C.

Test 1: Reserve funding. For loan applications dated on or after January 4, 2027, the building's annual budget must allocate at least 15 percent of total assessment income to reserves for capital expenditures and deferred maintenance. The previous floor was 10 percent. An association funding only 8 to 9 percent of its budget to reserves now fails this test. Buildings with a current SIRS (under HB 913) prepared within the last three years can substitute the SIRS-recommended funding level for the percentage rule, but in that case the budget must fund the highest reserve allocation recommended by the SIRS.

Test 2: Delinquencies. Fewer than 15 percent of units may be 60 or more days delinquent on association assessments. A building where 1 unit out of 7 is chronically late triggers failure. This test reads the association's accounts receivable, not the original assessment ledger.

Test 3: Single-entity ownership. In a project of 21 or more units, no single entity may own more than 20 percent of the units. The rule prevents one investor or one developer from controlling enough of the building to outvote the rest of the owners on assessments and rules. A 50-unit building where one investor owns 11 units fails this test.

Test 4: Presale. For new and newly converted projects, at least 50 percent of the total units must have closed or be under bona fide contract for sale. This test rarely matters for older Canadian-owned buildings but is decisive for new-construction condos in Tampa, Miami Brickell, or Fort Lauderdale.

Test 5: Master insurance. The association's master policy must cover replacement cost, with a per-unit deductible no greater than USD 50,000 (effective July 1, 2026, per LL-2026-03). Many older Florida coastal buildings carry hurricane deductibles of 5 to 10 percent of the building's insured value, which on a USD 30 million building translates to a per-unit deductible far above USD 50,000. Those buildings either renegotiate insurance, accept non-warrantable status, or disclose the gap.

Test 6: Commercial space. The non-residential floor area in a mixed-use project must not exceed 35 percent of total floor area. Mixed-use towers in downtown areas frequently fail this test.

The Limited Review process, which historically allowed lenders to skip a full project review for low-LTV loans on established condos, was retired by LL-2026-03 effective August 3, 2026 for established projects. Every condo loan in 2026 and forward goes through full project review.

Section 03How a Florida condo lands on the Fannie Mae unavailable list

In short. Fannie Mae maintains a non-public list of condo projects deemed "Unavailable" because they fail one or more project tests. The list is populated by Fannie Mae review when individual loans come up for purchase, by direct notification from lenders, and by HOA self-disclosure on the Condo Status Finder. Once a project is "Unavailable," every unit in it loses access to Fannie Mae financing until the issue is corrected and the project is requalified.

The "Unavailable" status is technical and operational: Fannie Mae has identified a condition that fails its eligibility rules. Lenders running a loan through Fannie Mae's Desktop Underwriter (DU) or Condo Project Manager (CPM) see the status flag and stop the loan. Borrowers do not see the list directly. The project does not get a public scarlet letter; it gets quiet rejection from every conventional lender.

The conditions that trigger an "Unavailable" status include unfunded critical repairs identified in a milestone inspection report, deferred maintenance flagged in board minutes or in an HOA questionnaire, master-policy deductibles or coverage gaps above thresholds, active structural-safety litigation, and any of the six warrantability tests above. The trigger is condition-specific; the same building can be warrantable on date A and unavailable on date B if a milestone Phase 2 surfaces deterioration.

The Florida-specific aggravating factor is the post-2022 disclosure regime. Under SB 4-D and HB 913, Florida condos must commission milestone inspections and SIRS, and must distribute those reports to owners and prospective buyers. The same documents flow to lenders during loan underwriting. A Phase 2 report that recommends USD 4 million in concrete repairs is, in practice, a non-warrantability flag the moment it lands in the file.

In March 2026, Fannie Mae also retired its Project Eligibility Review Service (PERS) for Florida projects. PERS was the mechanism by which a Florida HOA could obtain a pre-cleared project status. Its retirement means lenders revert to project-by-project review for every Florida condo loan. The administrative effect is more uniform underwriting; the practical effect is that no Florida condo carries a "pre-blessed" status anymore.

Section 04The Florida 2026 reset, in numbers

In short. The combination of HB 913 (Florida state law on milestone and SIRS), LL-2026-03 (federal Fannie Mae and Freddie Mac project rules), and the parallel Florida insurance market repricing has materially shrunk the warrantable-condo pool in Florida. The effect is most acute on coastal buildings 25 to 45 years old.

Three forces converged. First, HB 913 forced every condo of 3 or more habitable stories to commission a SIRS by December 31, 2025, and to fund reserves on a baseline plan with no owner waiver. Many buildings that had waived reserves for years either triggered special assessments to catch up or adopted budgets that legacy lenders flagged as deficient. Second, LL-2026-03 raised the reserve minimum from 10 percent to 15 percent and capped master-policy per-unit deductibles at USD 50,000. Third, Florida hurricane insurance premiums and deductibles repriced sharply between 2022 and 2025 due to insurer departures, Citizens Property Insurance growth, and reinsurance cost increases.

Statewide condo inventory rose by approximately 38 percent year-over-year through 2025 to 13.2 months of standing supply, pending sales fell by 21 percent statewide, and median condo values declined by 4.7 to 9.9 percent in the major Florida markets. Industry estimates put the share of Florida condo buildings non-compliant with at least one element of the new framework at well over half. The exact non-warrantable share moves with each Lender Letter and HOA budget cycle, but the direction has been monotonic since 2022.

Section 05Financing alternatives for a Canadian buyer

In short. Canadians buying a Florida condo have four financing paths: cash, Foreign National loans, US-citizen-spouse cosignature, and rare cross-border programs from Canadian banks' US subsidiaries. Conventional Fannie Mae and Freddie Mac mortgages are not available to non-US-resident buyers regardless of the building's warrantability status, so a Canadian non-resident buying a non-warrantable building loses no option that was ever available.

Path 1: Cash. The simplest path. A Canadian wires US funds to the closing agent, the title company records the deed, and there is no mortgage. No warrantability test runs against the building. The buyer's exposure is fully embedded in the unit's eventual resale, which is constrained by the same warrantability tests when the next buyer arrives.

Path 2: Foreign National loan. Several US private and portfolio lenders offer mortgages specifically designed for non-resident buyers. Typical 2026 terms: 25 to 40 percent down payment, interest rates 1.5 to 3 percentage points above conforming, 30-year amortization usually with a 5 or 7 year fixed period and reset thereafter, no US credit history required (lender uses Canadian credit, asset statements, and proof of income). Foreign National loans are typically portfolio loans held by the originating bank and not sold to Fannie Mae, so the building's warrantability status matters less, but most lenders run their own internal building review.

Path 3: US-citizen-spouse cosignature or sole borrower. A Canadian married to a US citizen or US permanent resident can sometimes use the spouse as the primary borrower on a conventional mortgage, with the Canadian on the title but not on the mortgage. This requires the spouse to qualify on income and credit alone. Tax-residence and probate consequences should be analyzed before structuring this way.

Path 4: Cross-border programs. RBC Bank (Georgia, the US subsidiary of Royal Bank of Canada), BMO Harris (US arm), and a small number of US lenders offer cross-border mortgages that recognize Canadian credit and income directly. Terms vary; availability depends on the lender's appetite at the time. These programs often require the borrower to maintain a deposit relationship with the US affiliate.

In every path, the building's structural and financial condition still matters. Foreign National lenders typically run their own project review, even though their criteria are looser than Fannie Mae's. Cash buyers face no project review at acquisition but absorb the full warrantability discount at resale.

Section 06How a Canadian buyer checks warrantability before signing

In short. Three documents establish a Florida condo's warrantability status: the most recent HOA budget and reserve study, the master insurance certificate, and a recent condo questionnaire (the form lenders complete during underwriting). Two tools provide direct status checks: Fannie Mae's Condo Status Finder (HOA-side) and a lender-run Condo Project Manager pull (lender-side).

The condo questionnaire is the operational document. Lenders use a standard form (Fannie Mae Form 1076 / Freddie Mac Form 476) to ask the property manager about all six tests. The questionnaire surfaces reserve funding, delinquencies, single-entity ownership, master-policy deductibles, commercial space percentage, and any pending special assessments or litigation. Even a Canadian paying cash should obtain this form, completed by the property manager in writing, before removing the inspection contingency. The cost is typically USD 100 to USD 400, billed by the management company.

The Condo Status Finder is Fannie Mae's free public tool launched in 2024. HOAs and authorized advisors can search any project and see whether Fannie Mae has identified ineligibility conditions. A Canadian buyer cannot directly use it (registration is restricted to HOA roles), but the buyer's broker or lender can. Even a clean status finder result is not a warranty: it indicates only that Fannie Mae has not flagged conditions, not that the building has been affirmatively reviewed.

The HOA's most recent annual budget, year-end financial statements, and reserve study (or SIRS in Florida) are the underlying documents. They are required to be delivered to the buyer by F.S. §718.503 before contract becomes binding, and they show every input to the warrantability tests. Reading them with a checklist, line by line, takes about an hour. Skipping that hour, then absorbing a USD 50,000 warrantability haircut at resale, is the central avoidable mistake.

Section 07CA reference: how Canadian lenders treat condo financing

In short. Canadian residential lending has its own set of project tests for condos, less codified than the Fannie Mae regime. Provincial securities and disclosure laws set the bar for status certificates, reserve fund studies, and required disclosures, and the lender retains discretion on a building-by-building basis. The framework is closer to Fannie Mae's approach in spirit but executed bilaterally between the lender and the borrower rather than through a centralized project-status registry.

The Quebec attestation du syndicat, mandated since August 14, 2025 under Décret 991-2025, is the closest provincial analogue to the Fannie Mae project review, but it is delivered to the buyer (not the lender) and creates no standardized go or no-go status. A Canadian buyer who is used to negotiating a condo purchase based on a status certificate review will find the Florida regime more rigid: there is a bright-line warrantability test, and failing it eliminates entire categories of financing.

Honest scope note. Equivalent comparisons for Ontario, British Columbia, and Alberta condo lending practice will be published in companion guides as they become available.

Section 08Worked example: a USD 450,000 Hollywood condo, two financing paths

In short. This example illustrates the carrying-cost difference between a warrantable and a non-warrantable Florida condo for a Canadian buyer using a Foreign National loan. All figures are USD 2026, illustrative.

Consider a 2-bedroom condo in Hollywood, Florida, listed at USD 450,000. The buyer is a Canadian non-resident with strong Canadian credit and 35 percent down available.

Scenario A: building is warrantable. Conventional Foreign National loan from a US private lender. 35 percent down: USD 157,500. Loan amount: USD 292,500. Rate: 7.25 percent (5/1 ARM, 30-year amortization). Monthly principal-plus-interest at 7.25 percent: USD 1,995. Add condo fees (USD 600), property tax (USD 530 monthly on USD 450,000 assessed at non-homestead rate), and insurance HO-6 (USD 110): all-in monthly USD 3,235.

Scenario B: building is non-warrantable. Same buyer, same building thesis, but the building has missed its milestone or carries a 5 percent hurricane deductible. Foreign National lenders that will still lend on this building generally require 40 percent down and price 1.0 percentage points higher. 40 percent down: USD 180,000. Loan amount: USD 270,000. Rate: 8.25 percent. Monthly principal-plus-interest: USD 2,028. Other carrying costs identical: condo fees USD 600, property tax USD 530, insurance USD 110. All-in monthly: USD 3,268.

The monthly payment difference is small (USD 33), but the structural asymmetry is significant. The Scenario A buyer is in a building whose unit can be resold to any buyer using any mortgage, including a future Canadian using cash. The Scenario B buyer is in a building whose unit can only be resold to a cash buyer or to a Foreign National borrower in the same lender pool. The effective resale buyer pool is approximately one-third the size, which translates directly into a price discount of 5 to 15 percent at exit.

Currency and period. All figures USD, 2026 conditions, illustrative only. Actual rates and terms vary by lender, by borrower file, and by week.

Section 09Common mistakes Canadian buyers make

1. Assuming "I'm paying cash, so warrantability does not matter." Cash insulates the buyer at acquisition. It does not insulate the unit at resale. The next buyer's financing options are the constraint that prices the resale market. A non-warrantable building's units trade at a discount whether the seller is in the deal with cash or with a mortgage.

2. Skipping the condo questionnaire to save USD 300. The questionnaire is the single highest-leverage document in the file. It surfaces every warrantability test on a single page. The cost is rounding error against the carrying cost of a building.

3. Believing the Florida PERS approval still exists. Fannie Mae retired the Project Eligibility Review Service for Florida projects in March 2026. Pre-Surfside-era pre-cleared status no longer carries forward. Every Florida condo loan in 2026 goes through fresh project review.

4. Confusing "FHA approved" with "Fannie Mae warrantable." The two lists are separate. A building can be on one and not the other. A Canadian financing through a US-citizen spouse using FHA needs to verify FHA approval specifically, not assume Fannie Mae status implies it.

5. Trusting a listing agent's "the building is fine" without reading the financials. The listing agent is the seller's agent, not the buyer's. Their incentive is the close, not the buyer's downside. Reading the year-end financial statement and the SIRS is the buyer's protection.

6. Underestimating master insurance gaps. A USD 50,000 per-unit deductible looks high, but Florida hurricane deductibles are typically expressed as a percentage of insured value. On a USD 60 million building covered at 5 percent, the per-unit deductible exceeds USD 50,000 by a wide margin. Buildings with that structure are now non-warrantable under LL-2026-03.

7. Assuming the building can fix itself before resale. Curing a non-warrantable status requires action by the HOA: a budget vote to raise reserves, a special assessment to fund repairs, an insurance policy renegotiation. Boards move slowly; warrantability cures often take 2 to 5 years. A buyer holding for 3 to 5 years should not assume the cure will arrive in time.

Section 10Actionable due-diligence checklist for a Canadian buyer

1. Identify the building (legal name, address, year built, number of units) and the HOA's property management firm.

2. Request the condo questionnaire (Fannie Mae Form 1076 or equivalent) completed by the property manager in writing.

3. Request the most recent SIRS and year-end financial statements (balance sheet, income statement, reserve fund balance).

4. Calculate the reserve funding ratio as (reserves balance) divided by (SIRS-recommended balance). Below 70 percent is a yellow flag; below 50 percent is a red flag.

5. Read the master insurance certificate for replacement-cost coverage and per-unit deductible. Compare to the USD 50,000 cap effective July 1, 2026.

6. Read the year's board minutes and search for "special assessment," "loan," "litigation," "milestone," and "SIRS."

7. Have the broker or lender run a Condo Status Finder check if the building is large enough to be in the database.

8. Confirm financing path before signing. Cash, Foreign National loan, spouse cosignature, or cross-border. Match the financing path to the building's status. Do not contract on a building that requires conventional Fannie Mae financing if the building is non-warrantable.

9. Price the warrantability discount into the offer. If the building is non-warrantable, expect a 5 to 15 percent reduction in achievable resale relative to a warrantable comp.

10. Document the questionnaire and SIRS in the file for the eventual resale. The next buyer will ask for the same documents, and a clean file shortens the next transaction.

Section 11FAQ

Is the Fannie Mae unavailable list public? No. The list is operational, accessed through Fannie Mae's Condo Project Manager by lenders. HOAs and authorized advisors can use the Condo Status Finder to check a single project's status. There is no published roster of buildings.

My building lost warrantability. Can it regain it? Yes, if the underlying condition is corrected. A reserve-funding shortfall can be cured by a budget vote and one or more years of higher contributions. A milestone-related condition can be cured by completing the inspection and any required repairs. An insurance condition can be cured at the next renewal.

Are condo-hotels (condotels) warrantable? Generally no. Buildings operated as hotels, with rental management offices on site, daily-rental restrictions, or hospitality-style amenities, are typically classified as condo-hotels and are categorically ineligible for Fannie Mae financing. Foreign National lenders may finance condo-hotels under different terms, sometimes as DSCR loans.

Does the 50-percent-investor rule still apply? The 50-percent investor concentration rule was retired by LL-2026-03 effective March 18, 2026. The single-entity rule (no one entity owns more than 20 percent of units in 21+ unit projects) still applies and is sometimes confused with the retired rule.

My HOA has a current reserve study but is not at 15 percent of budget. Are we warrantable? Possibly, under the SIRS substitution rule. If the reserve study was prepared by an independent qualified professional within the last three years and the budget funds the highest reserve allocation recommended in the study, the building may meet the test even if the percentage is below 15. The lender will review case by case.

Does a non-warrantable building affect property tax? No. Florida property tax is assessed by the county property appraiser based on market value and applicable caps (Save Our Homes for homestead, the 10 percent cap for non-homestead). Warrantability is a financing concept and is invisible to the assessor. It can affect market value indirectly through resale comparables.

Are 2-story condos affected? Most warrantability tests apply to all condos regardless of stories. The Florida-specific milestone and SIRS regime applies to 3 stories or more, but Fannie Mae's reserve-funding, delinquency, and insurance tests apply to any condo project Fannie Mae buys loans on, including 2-story buildings.