Fannie Mae Halts Financing for 6,102 Condos in Laguna Woods Village

Fannie Mae Halts Financing for 6,102 Condos in Laguna Woods Village

In a surprising move, Fannie Mae has abruptly stopped providing condo warranty approval for 6,102 condominiums and single-family condos at Laguna Woods Village, a retirement community in south Orange County. This decision, effective as of January 31, specifically impacts Third Laguna Hills Mutual, which represents nearly half of all the homes in the 55-and-over community.

The reason behind this sudden change lies in the community’s nearly $1 billion insurance deficit, which has prompted Fannie Mae to remove Third Laguna Hills Mutual from its list of eligible condos. This means that residents in this community will no longer have access to cheap, conventional financing for buying or refinancing their homes.

The shift in condominium insurance requirements follows the tragic Surfside condo collapse in South Florida in June 2021, where 98 occupants lost their lives due to inadequate insurance coverage. This incident has led to stricter insurance requirements for condos across the country, impacting communities like Laguna Woods Village.

This is not the first time the village has faced financial challenges. Two years ago, United Laguna Woods Mutual, another housing cooperative in the community, lost its only lender due to similar insurance requirements set by Fannie Mae.

As a result of this change, buyers in Laguna Woods Village are now faced with the prospect of finding non-warrantable condo financing, which requires a minimum of 20% down payment and higher interest rates compared to conventional financing options. This could potentially lead to a decline in property values in the community.

Real estate agents and homeowners in the community are concerned about the impact of this financing halt on property values and the overall housing market in Laguna Woods Village. The lack of access to affordable mortgage financing could deter potential buyers and impact existing homeowners looking to refinance their properties.

Overall, the situation in Laguna Woods Village highlights the importance of adequate insurance coverage for condos and the potential consequences of not meeting these requirements. As residents navigate these changes, they are left to grapple with the financial implications of this sudden shift in financing options.