Anticipating a refinancing offer that could save him $647 a month, Dave Mayers of Jupiter instead got a jolt of reality: The deal was nixed after lenders saw the level of insurance his condominium association was carrying.

Inadequate insurance is the most oft-cited reason that more condominium associations are on federal mortgage guarantor Fannie Mae’s blacklist, a number that's more than tripled over the past two years. This kind of listing makes it more difficult for condo buyers to get loans, for condo associations to borrow for repairs and, for residents like Mayers, to refinance an existing mortgage. “I’ve never been rejected for a loan in my life,” said the 74-year-old retired Pennsylvania furniture store owner. New Florida condo regulations weaker than what some banks require The Legislature this session passed a bill that made new rules for condo associations to take out loans and get lines of credit to finance needed repairs — seen as helping condo dwellers cope with new state regulations designed to avert a deadly disaster like the one that felled a 40-year-old Miami-area condo tower.

Damage at Building 5 of Villa Del Sol condominiums

The new legislation clarifies three options for acceptable levels of condo insurance.

Still, following the guidelines set out in the bill awaiting Gov. Ron DeSantis’s signature might not get associations a clean bill of health from financial institutions, which are looking for condos to be insured at full replacement value.

Talking about the legislation's insurance tweak, the bill’s sponsor, Sen. Jennifer Bradley, R-Fleming Island, said: “There are associations in Florida that I think are being asked to carry coverage levels at an exorbitant cost and insurance levels they will never touch. So … in consultation with their insurance specialist, they (condo associations) will be able to land on the proper level that is adequate from a protection standpoint.”

How much is enough property insurance?

The bill allows for condos’ common property to be insured at “insurable value.” Fannie Mae, however, requires what may be a higher bar: that the common property is insured for the full replacement cost — a guidance that many banks follow in deciding who gets a loan.

Andy Kasten, president of Fort Lauderdale-based Creative Financial Property and Casualty, said insuring for anything less than full replacement value could mean of a repeat of the Surfside debacle, where the association was unable to rebuild because of underinsurance. In that tragedy, 98 people were killed when the Champlain Towers South condominium in Surfside collapsed in the early hours of June 21, 2021.

"If in fact they are allowing condos to insure at less than full replacement, where is the additional money going to come from to rebuild the structure in the event of a catastrophe?" Kasten asked. "It runs counter to what these laws that changed after the Surfside collapse were supposed to do. You can never assume that you are not going to have a 100% loss."

Rep. Vicki Lopez, R-Miami, who sponsored the legislation about to become law, acknowledges that the clarified options in her bill don't line up with Fannie Mae's. She argues that it's financial institutions that need to adjust their requirements. What they consider acceptable levels of insurance when it comes to backing mortgages are holding condos hostage, she said.

"If you are ensuring to the full replacement value, it could be said that you are over-insured, because never in a disaster has one of our condo buildings been leveled," Lopez said. "They may have roof issues, air conditioning issues, window issues, but the whole building doesn't go down.

"... My next step is to try to connect with either U.S. Sen. (Ashley) Moody or Sen. (Rick) Scott or one of our congressional delegation members to say, look, we have to have a meeting with [federal home loan company] Freddie Mac and Fannie Mae so they are aware of the financial impact they are having on condo owners in terms of insurance when they insist on having full replacement value," she said.

Condo roof too old for insurance, too young for replacement

His condo’s status has Mayers — and many more who may not know it — in a catch-22 he’s been emailing lawmakers and state agencies about to no avail, he said. The condo can’t get the required insurance because the roof is too old, but it’s not old enough that it needs replacing, he said.

“They’ve been getting prices on replacing the roof, but they don’t want to do it yet — it’s not an emergency,” Mayers said. “We have to fund other things the state is mandating.”

As the state's scrutiny of the condition of condominium buildings increased following the Surfside disaster, the insurance market for condominiums worsened.

Only two or three companies would insure garden-style, low-rise condos and coverage for high-rises were simply unaffordable compared to years past, according to Tyler Spaedt, vice president at Valley Insurance Services, which specializes in condo communities.

“The last three years were the toughest markets that there’s ever been in Florida,” Spaedt said.

In the last five to eight months, though, things have started looking better.

“People are starting to save and more (kinds of) coverages are becoming available,” Spaedt said.

Still, he says, about one of the 10 of associations he’s covering can't manage to buy the insurance that would pay for the full replacement value of a condo association’s common property.

“It’s not always about what they're going to save, even though that's a big part of it. … Some of it (the associations getting insured for less than the replacement value) is that it’s not available to them, based on the condition of the building,” Spaedt said.

The Florida condos blacklist stems from answers to lender questionnaires

There are 1,438 “blacklisted” Florida condos deemed ineligible for Fannie Mae-backed loans, and potentially other banks. The blacklisting, mostly confidential, is the result of answers given to lender questionnaires that involve everything from deferred maintenance to delinquent special assessments.

One condo can be on the list for multiple problems, but insurance problems are cited the most often among these condos, according to attorney Jake Marcus, whose practice, Allcock Marcus, has offices in Miami and Massachusetts.

There’s some comfort, though.

“What's happening in Florida is eventually going to make its way to other jurisdictions,” Marcus predicted.

Michael J. Gelfand, a West Palm Beach attorney who specializes in condo association law, said he urges associations to get the full replacement value if they can.

“Insuring a roof for its actual cash value doesn’t work,” Gelfand said. “When it’s depreciated, it’s pennies on the dollar for the cost of replacement.”

Mayers said he was hoping the expected drop in his interest rate was going to help him pay for the new assessments triggered when his condo underwent its state-required structural integrity reserve study, trying to comply with the first set of state regulations that were passed, post-Surfside, in 2022.

“I was really counting on the savings I was going to receive from a refinance to help with all the added expenses of the increased reserves,” Mayers said. “If condos in Florida can’t acquire mortgages or refinancing because of Fannie (Mae’s) … new mandates and pile that on top of the (structural integrity reserve study) mandates, what happens to seniors, like myself, and to the property values in Florida? This is just crazy.”