Condominium units in projects where the Homeowners Association (HOA) is involved in pre-litigation, mediation/arbitration, or formal litigation are classified as “non-warrantable” by Fannie Mae (FNMA). As a Government-Sponsored Entity (GSE), Fannie Mae’s primary function is to provide liquidity to the nation’s mortgage market. Since non-warrantable condominium loans cannot be sold to Fannie Mae, very few lenders offer financing options for these properties.

To secure a loan for a non-warrantable condominium, borrowers must work with a lender that either retains the loan in its portfolio or sells it to an investor who does the same. Most lenders—including banks, mortgage banks, and wholesale lenders—prefer the flexibility of selling loans in the secondary market, which is why they typically avoid non-warrantable condominium loans.

Lenders offering condo litigation loans for non-warrantable properties are scarce, and those that do usually provide only Adjustable-Rate Mortgages (ARMs). While conventional 30-year fixed mortgages are available, they are limited and offered by only a few specialized lenders. Fannie Mae establishes loan guidelines and limits annually, with requirements varying by county.

The greatest challenge in financing a non-warrantable condominium due to litigation is finding a lender with a dedicated condo litigation loan program. Many borrowers prefer to work with their existing banks or mortgage companies, but these institutions often lack the expertise to process and fund these specialized loans.

Torrey Pines Mortgage specializes in condominium financing, offering 30-year fixed condo litigation loans for properties involved in construction defect litigation. We are the preferred lender for top construction defect attorneys and frequently serve as consultants. Our loans adhere to Fannie Mae guidelines, with rates only slightly higher than standard market rates.