A lot of the laws about community associations exist because of Fannie Mae & Freddie Mac. Fannie Mae and Freddie Mac are Government Sponsored Enterprises created by the U.S. Congress. Although they are government sponsored, they are privately-owned corporations without government guarantees or protections. They purchase mortgages on the secondary market, pool them, and sell them as mortgage-backed securities to investors on the open market.

Fannie Mae and Freddie Mac each have standards for the mortgages they are willing to purchase. These two sets of standards include requirements for community associations. For instance, Fannie Mae and Freddie Mac have insurance requirements for condominium associations. If your condominium association doesn’t meet their insurance requirements, standard mortgages are not available for the units in your condominium. Developers and owners want standard mortgages to be available for the units in a community association because it makes it easier to sell the units. All things being equal, a unit in a non-conforming project will be more difficult to sell and may affect the value of the units. As a result, it is common for statutory requirements and governing documents to comply with the Fannie Mae and Freddie Mac guidelines.

In addition, the free markets also tend to follow the guidelines. For instance, it is difficult to find association insurance policies in Hawaii that do not meet the Fannie Mae and Freddie Mac guidelines. The insurance companies want to have policies that will appeal to the biggest market. Creating insurance policies that are not in demand doesn’t make financial sense. Therefore, even if you wanted to purchase a non-conforming insurance policy for your association, you would have a hard time finding such a policy.