Following the wide collapse of the origination market for condos, Fannie Mae (FNM) is now launching a review of hundreds of condominium projects in Florida. The GSE hopes that by doing so, more and more condos will become Fannie Mae-eligible. "Projects deemed to be sufficiently stable following the closer examination are granted a Special Approval designation, meaning lenders can originate and deliver mortgage loans secured by units in these projects to Fannie Mae," said the GSE in a statement. The report states that six Fannie Mae employees based in Florida will conduct an examination of condominium projects across the state that may not currently meet the standard eligibility. This could be due to insufficient occupancy status, owners not being current on homeownership association (HOA) dues, the unit's lack of financial stability and overall poor condition of the property. With the 'Special Approval' designation, exceptions may be granted on a case-by-case basis by the six-member team where the property does not meet certain criteria, but is deemed sufficiently stable in other areas. For example, if a property shows higher rates of delinquencies in owners paying their homeowners association (the current maximum is 15% behind on HOA dues), but the unit is overcapitalized in its reserve fund for essential repairs (the current minimum is 10%), then an exception may be made. Florida is ground zero for the housing collapse when it comes to condos and rebuilding the market is proving to be a challenge. Investors are no longer hugely active in Florida condominiums, a source tells HousingWire, and owner occupiers will often not qualify for an Federal Housing Administration (FHA) loan. "Mortgage insurers are also out of the market," the source said, "this should give borrowers the option to pursue a more conventional loan, an alternative to FHA." While Fannie does not originate loans, the firm remains confident that this move will help provide a liquidity backstop for lenders in the state. However, questions remain as to the effect this move will have as FHA guidelines for originating condo mortgages continues to tighten: the spot approval process, for instance, will be eliminated for all case numbers on or after Feb. 1, 2010. The FHA guidelines intend to hedge risks for investors, by limiting their geographic exposure, despite the fact that a huge uptick in third-party money is seen as a necessary addition to the mortgage finance market (see HousingWire's February Beyond Binary column for a full report). The FHA guidelines state an investor may own no more than 10% in a single set of units. For two and three unit projects, no single investor may own more than one unit. Further, no more than 15% of the total units can be more than 30 days past due on their condominium association fee payment. At least 50% of the units must be sold before any mortgage on a unit can be endorsed. In some cases, FHA will temporarily reduce the pre-sale requirement to 30%. In light of this, Fannie's move is widely supported by the National Association of Realtors as well as those who have boots on the ground in Florida: "Our state is probably the hardest hit as far as the condo market is concerned, and Fannie Mae's new effort to take a closer look at project eligibility could go a long way to putting projects back on a healthy financial track," said Moe Veissi, a vice president at NAR and broker-owner of Veissi & Associates in Miami. Write to Jacob Gaffney.