It’s not just Florida facing a downturn, as Alabama has its own condo challenges
With housing affordability challenges being a major storyline of 2025 in the industry, many potential homeowners have considered condominiums and townhomes as more affordable housing options.
However, condo markets in many states have been tough for brokers to find financing for customers. Many condos don’t meet agency guidelines, leaving non-QM and private financing among the limited options for these non-warrantable structures.
While many of the headlines have focused on states like Florida and California, the issues are not limited to those areas. One Alabama-based broker told Mortgage Professional America that he has seen the issues locally on the Gulf Coast.
Ross Sykes (pictured top), a mortgage advisor with Homefront Lending LLC, will discuss how to address condo funding challenges at the upcoming AIME Fuse event in Nashville. He said over the years, he’s been able to step in where others have failed to help customers.
“There have been several times where I've had people come to me who tried to get financing for a condo with a bank or a lender or a broker, and they're not able to do it,” Sykes told MPA. “I said, ‘Did they pull the master policy for the condo? They're like, I don't know if they did or not. Did they check the HUD? Did they check the VA, the condo approval?’ Some of these basic things were missing.”
A local and nationwide problem
Sykes is located on the Gulf Coast of Alabama, and the majority of the condos in the market are non-warrantable. This means finding other funding options besides Fannie Mae and Freddie Mac, but there is still work to do.
“You have lenders that say, ‘Well, they're non-warrantable. We can do non-warrantable condos,’” Sykes said. “No, no, no. There is a difference. You can have warrantable and non-warrantable, but even non-warrantable has guidelines you have to stick to in that master insurance policy. Being above 5% from a deductible is a no-no for many lenders.”
Sykes sees the condo issue happening in so many markets. Association fees continue to climb, while the insurance being taken out by many of these associations isn’t sufficient to get financing.
“It’s a nationwide issue,” Sykes said. “The condo association fees across the country continue to elevate, because they have to take care of their costs when it comes to maintenance and inspections that are required. What I'm really noticing is they're going with higher insurance deductibles. Higher insurance deductibles mean they get cheaper insurance, which is not always good for their tenants.
“That's the way they're trying to offset some of those condo association fees and also put more money in reserves for something happens, like they have a hurricane. They’re actually hurting the owners of the property. Because when the owners of these condos are trying to sell, fewer people are buying because most people need financing.”
Guideline changes needed
It’s not just condos that are in crisis. Sykes said in many cases, townhomes also fall under condo associations. He wishes there could be changes to financing and insurance guidelines that could help more people get the loans they need.
“Townhomes are typically under a condo association as well,” he said. “Even if they say they're a townhome complex, a lot of times they're a condo association that's tied to that. If there could be a fix on this, and if there were (new) guidelines for financing. Obviously, it's at 5% but what we really need is, for instance, if you get a flood policy on a home or a condo that's part of the association, you're getting that condo's flood policy.
“If you need a little bit more, the individual owner can get a supplemental flood to offset that. It would be neat, and it would help a lot with the affordability issues across the country if you could get a rider. I don't know if it's ever doable, but you know, everything starts with conversation.”
Homebuyers in flood-prone areas face major delays as the government shutdown halts the National Flood Insurance Program. Experts warn over 100,000 home loans could be affected, costing billions in stalled transactions.https://t.co/ISKKJDFtXj
— Mortgage Professional America Magazine (@MPAMagazineUS) October 15, 2025
One reason Sykes wanted to speak on the topic at Fuse is that he hopes to educate more brokers about the challenging condo market. By helping more brokers, he’s hoping more people can get the financing they need.
“Anytime I see an opportunity to help others and to level up our industry, and especially the broker side of the house, I'm willing to put in the work and step in and see what we can do to improve it,” he said. “If I can help loan officers running across that situation, so that the broker name isn’t discredited a little bit because of a lack of knowledge, I'm going to do it.”
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