WSJ What’s News - How a Secret Mortgage Blacklist Is Making It Hard for Condo Owners to Sell

Episode Date: March 17, 2025

P.M. Edition for Mar. 17. Condo sales are falling through when would-be buyers find that the property they want to purchase is on a mostly secret mortgage blacklist maintained by Fannie Mae. WSJ insurance reporter Jean Eaglesham tells us about the list and why it is growing. Plus, President Trump lays the groundwork for investigating people pardoned by President Joe Biden. And recent market volatility is leaving even hedge funds floundering. We hear from WSJ special writer Gregory Zuckerman about the funds’ impact on the broader market and what signals they will be looking at in the near future. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

With record levels of dry powder available for investment, find out what's in store for private markets in 2025 and beyond. Listen to Crafting Capital in partnership with UBS at partners.wsj.com slash UBS, Spotify and Apple podcasts. How a secret mortgage blacklist leaves homeowners stuck with condos they can't sell. We're seeing these developments, particularly in areas of high risk, so disaster-prone areas where the insurers are pushing up the cost of insurance quite dramatically. Plus, why last week's market volatility made even the hedge funds flounder. And President Trump lays the groundwork

to investigate people pardoned by Biden. It's Monday, March 17th. I'm Alex Osila for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Retail sales rose modestly in February, offering reassurances that while consumer spending has slowed this year, it hasn't stopped completely. Sales edged up a seasonally adjusted

0.2% from the prior month, missing economist expectations. The slimmer gain in February was concentrated in sales at automobile and auto part dealers. The details of the report were mixed. Sales rose at grocery stores and non-store retailers, a category that's dominated by online retailers, while they fell at electronics and appliance retailers, department stores, and restaurants and bars. Those are a sign that Americans are scaling back on nice-to-halves. Meanwhile, the Organization for Economic Cooperation and Development, OECD, said that higher U.S. tariffs on imports are set to slow economic growth

and push inflation higher around the world. In its quarterly report published today, the OECD said that the U.S. economy will now likely grow by 2.2% this year and 1.6% next, less than previously forecast. Despite the weaker-than-expected retail sales data, U.S. markets were up today, building on Friday's gains. The Nasdaq rose about 0.3%, the S&P 500 ticked up roughly 0.6%, and the Dow ended the day about 0.9% higher. So today, markets may be up, but as we've been reporting, they've been volatile recently.

Last week's market whipsaw, during which recession fears grew and traders were confused about the market's direction, was an especially wild ride for hedge funds. They floundered like everyone else, and even helped drive stocks further down. According to Goldman Sachs, last Monday's market drop witnessed one of the largest reductions in risk by hedge funds in the past 15 years. WSJ special writer Greg Zuckerman joins me now. So Greg, when hedge funds undo bets and mass like this, what kind of impact does it have on the broader market?

Yeah, so hedge funds, they control a lot of money, but they also have a lot of influence. And it's largely because not only do they manage a lot of money, but they borrow a lot of money. So when they head for the exits, then it affects the broader market, but it especially has an impact on specific stocks. Everything from Apple to Alibaba, a lot of high tech names, the momentum names, as we

call them. So what has all this movement in the past week signaled about whether or not a recession might be coming? Well, the odds are going up. And you see that in the economic figures, consumer confidence, for example. You see that in slowing retail sales and such. But you also see in the markets.

The market is charged with anticipating the future. They often get it wrong. But the market is sending a message that we should be nervous about the outlook for the future of the economy. So what are some of the factors that hedge funds are going to be paying attention to in the coming weeks and months? You want to look at the Federal Reserve, but even more importantly, it's all about Donald

Trump. And what's really difficult for traders today is to get into his mind and to understand how serious he is about tariffs. Donald Trump has not signaled that he's going to use these as tools, per se. He seems to be more comfortable with an all-out trade war, and that gets to the nervousness out there. That was WSJ special writer Greg Zuckerman. Thank you, Greg.

Oh, great being here. Coming up, a secret mortgage blacklist is leaving a growing number of homeowners with unsellable condos. More after the break. At Enterprise, we know you're constantly on the move. Getting this. Thanks, Mom. Fixing that. You reach a destination, and then it's on to the next.

And when life is moving at the speed of, well, life, Enterprise is right there with you, around the corner and around the globe. We'll keep you moving forward. Enterprise. Her lives in drive. Condo owners across the US are being faced with a nightmare scenario.

They're about to sell their property, only to learn that their buyer is falling through because the property is on a mostly secret mortgage blacklist maintained by Fannie Mae. A spokeswoman for Fannie disagreed with characterizing Fannie's database of projects, which includes properties that both do and don't meet its lending criteria, as a blacklist. According to Kondo lawyer Stephen Marcus, who, along with other industry legal and finance players, has access to the rapidly growing list, the number of properties that failed to meet Fannie Mae's standards increased from a few hundred developments in 2021 to more than 5,000 this month.

I'm joined now by WSJ insurance reporter Jean Eaglesham. Jean, what could get a property put on this list? The issues with a property that can make them blacklisted include structural issues, such as safety concerns, but also financial issues like cash reserves. And increasingly in recent years, a bigger and bigger problem is insurance. Fannie Mae and Freddie Mac, who are mortgage finance giants who are

central to the market, are increasingly saying that the coverage these developments have isn't good enough for their requirements. Now that really matters because the main mortgage lenders, they look to sell their loans to Fannie and Freddie. If they can't sell them, then the lenders will turn around and say actually we can't give you the most common type of loan. That leaves buyers trying to get a different type of loan, which is often more expensive, may require more money upfront, or they may just give up on the transaction. We should note that a Freddie spokesman said that the company doesn't maintain a list

of condo developments that don't meet its criteria. So who's actually being affected by this? We're seeing these developments particularly in areas of high risk, so disaster prone areas, where the insurers are pushing up the cost of insurance quite dramatically and also cutting the coverage. And it's those cuts to insurance coverage that are causing a lot of the problems.

Condo owners in these developments, where they're blacklisted, are worried about how that's going to impact their value of their properties, what's going to happen when they do come to sale. But what we found is that if they look to get an insurance policy that does meet Fannie's standards, in some cases, the rate that's being asked for that

is unaffordable. What exactly has changed here? Is it that the insurance policies themselves are changing? Is it Fannie and Freddie are changing how they're approaching it? So there's a few things changed here. One is after the surfside collapse in Florida, the tragedy in 2021, there were tougher safety laws put in place in the state and Fannie, as a result as well, tightened up their enforcement of their existing requirements. Another thing that's

changed is that FANY and Freddie are looking to enforce their requirements more strictly according to real estate folk and lenders that we've spoken to. And a third factor that's coming together is insurers in a very tough climate for property insurance we've seen in the last couple of years are increasing rates but also cutting coverage in some cases. That was WSJ insurance reporter Jean Eagleshim. Thank you Jean. My pleasure. President Trump has questioned the validity of pardons granted by President Joe Biden before he

left office, laying the groundwork for investigating the people that Biden had granted legal immunity. Any move to investigate or prosecute the individuals pardoned by Biden would mark a significant escalation of Trump's defiance of longstanding legal norms. It comes after the Trump administration said over the weekend that it had deported

alleged Venezuelan gang members under a centuries old wartime law, despite a court order that temporarily blocked it from doing so. In a social media post this morning, Trump asserted that Biden's pardons were, quote, void, vacant, and of no further force of effect because they were signed with an auto pen.

Without citing evidence, the president said that the documents weren't properly explained to Biden and that the staff who used the auto pen, quote, may have committed a crime. Former Biden aides didn't immediately comment. AutoPens are robotic machines that imitate signatures and are used frequently by presidents and other officials to sign documents.

The use of AutoPen has drawn scrutiny in the past, though previous administrations have said that documents signed by AutoPen are legally valid. Trump told reporters yesterday that he only uses the Autopen for niceties like signing correspondence and said it's quote disgraceful to use the machine for more substantive matters. Harvard University is significantly expanding its financial aid. It's making undergraduate admission tuition-free for families making up to $200,000 and completely free for families making up to $100,000.

Families making more than $200,000 can also qualify for aid, depending on circumstances such as the number of children in college and amount of debt they carry. Harvard estimates that 86% of U.S. families could be eligible for financial help under the new system. WSJ education reporter Sarah Randazzo explains why Harvard is making the change. There's a few factors. One is just the squeeze that middle-income families, those making above six figures face, they don't qualify for the typical financial aid that those who have very low salaries can pretty much go to many colleges for free, but they don't qualify for the typical financial aid that those who have very low salaries can pretty much go to many colleges for free, but they don't make enough to comfortably be able to pay 50, 60, 70,

80 thousand dollars a year to send their children to a private school. And so a lot of schools like Harvard have been increasing the aid for this group of families over time. And then secondly, we are in this climate right now of political strife around a lot of elite universities. And so I don't know if the timing is just a coincidence, but there is public pressure on Harvard and others around some of the Israel Hamas war protests. And so this is a bit of good publicity for them in that climate as well. And finally, do you know what a company called Lumen does? If you're watching the Apple TV Plus show, Severance, this is one of those big

looming questions, though the general consensus is that it's nothing good. In real life, companies named Lumen do things like make retractable glazing, manufacture metabolic measurement devices, or give you a root canal. As Severance has become more popular, these companies have seen their social media profiles flooded with fans of the show, and they've had to decide how to address the new echo As Severance has become more popular, these companies have seen their social media profiles flooded with fans of the show, and they've had to decide how to address the new echo that their company name evokes. Some have gone to pains to establish how their company culture is different from the fictional

one. Others see it as a potential publicity windfall. Praise Keir, as workers at Severance's Lumen would say, referencing the fictional company's elusive cult-like founder. And that's what's news for this Monday afternoon. Today's show is produced by Anthony Bansi and Pierre Bienamé, with supervising producer Michael Kosmitis. I'm Alex Osola for The Wall Street Journal.

We'll be back with a new show tomorrow morning. Thanks for listening.