Does pending litigation make our condo project ineligible?
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Not every lawsuit makes a project ineligible under Fannie Mae's current Guide. Litigation involving the HOA, or specified sponsor or developer litigation, can be ineligible, while documented minor matters may fit listed exceptions that the lender must evaluate.
What does the Guide distinguish?
The ineligible category includes an HOA or co-op corporation named in pending litigation, and sponsor or developer litigation tied to safety, structural soundness, habitability, or functional use. Pre-litigation activity reasonably expected to proceed to formal litigation is evaluated under the same policy.
The Guide lists possible minor matters, including certain nonmonetary disputes, insured matters, some plaintiff actions, localized unit damage, and matters whose anticipated damages and legal expenses are not expected to exceed 10% of funded reserves. Personal-injury, death, and construction-defect matters have additional conditions.
What should the board gather?
Provide the pleadings or demand, parties, subject matter, claimed and anticipated amounts, insurance carrier position, repair status, and current funded reserves. The lender must document its analysis; the title of the case does not decide the result.
This is not legal advice or a warrantability determination.
Sources
- Fannie Mae Selling Guide B4-2.1-03, Ineligible Projects, version August 5, 2026 — Litigation or Pre-litigation Activity.
Primary source accessed September 11, 2026.