A tenant’s right of first refusal does not make a mortgage ineligible for sale to Fannie Mae when the right comes from a statute or local ordinance, the company told lenders on Oct. 7. The change is part of Selling Guide Announcement SEL-2026-09, which Fannie Mae describes as expanding eligibility on the topic. It matters to owners and buyers of tenant-occupied homes in places where the law gives tenants the first chance to buy, because a loan that cannot be sold to Fannie Mae is harder to finance. Rights written into a recorded document are treated differently.
Fannie Mae’s announcement says a tenant right of first refusal does not make a loan ineligible when it arises from a statute or local ordinance, and it adds that “recorded rights of first refusal remain subject to our existing Selling Guide requirements.” Lenders may use the change immediately. The announcement calls the item a clarification and does not restate the earlier wording, so it does not spell out which loans were affected before.
The question for a landlord thinking of selling is whether a tenant’s purchase right will stop a buyer from getting a mortgage that Fannie Mae will buy. Under the update the answer depends on where the right comes from. A right created by a law or city ordinance, with no separate recorded document, does not by itself disqualify the loan. A right recorded against the property still has to clear the guide’s existing title rules, which are laid out in section B7-2-05, last updated the same day.
Lenders can use the new rule immediately, and the Schedule K-1 change in the same announcement applies to applications dated on or after Dec. 2, 2026.
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What a statutory right of first refusal looks like
Washington, D.C. has the oldest such law. Its Tenant Opportunity to Purchase Act has been in effect since 1980, and a New York Law Journal piece by Peter E. Fisch and Salvatore Gogliormella, published May 13, 2025, says tenants get the right to buy when an owner lists a building or receives a third-party offer. The process can end with the tenants buying, converting to a condominium or co-op, assigning the right to another buyer, or waiving it. About 95% of cases end in assignment, the authors write, and proceedings delay transactions by an average of 5.3 months and by up to 420 days.
The same article describes a newer ordinance in Chicago, a pilot for a district on the Northwest Side that took effect in March 2025. For buildings of one to four units, an owner must give notice 30 days before listing and tell tenants within five days of a third-party offer. Tenants in one- or two-unit buildings then have 15 days to exercise the right.
Not every property is covered. Next City reported in 2020 that D.C. amended its law in 2018 to exclude most single-family homes, and Chicago’s pilot applies only inside a defined district. The Fannie Mae announcement does not name any city or statute, which means it applies to any tenant right of first refusal that a statute or local ordinance creates.
Recorded rights stay under the old test
The distinction Fannie Mae drew is between a right created by law and one created by paper. Its Selling Guide page on title exceptions says a party in possession is acceptable only if that party’s rights do not include a right of first refusal to purchase the property under an instrument of record. The same page limits any tenant’s lease term to two years or less. The page is dated Oct. 7, 2026, and lists SEL-2026-09 as the latest related announcement, though it does not tie that announcement to these particular provisions.
Read together, the two sentences mean a right found only in a statute or ordinance is no longer a bar on its own, while a right of first refusal recorded against the property stays subject to the existing requirements. Both can give a tenant the same practical chance to buy, so the source of the right, not its effect, decides how a lender treats it. The announcement gives no examples of either kind and does not say how lenders should handle a property that has both.
Fannie Mae’s announcement also covers attorney opinion letters, used in some places in place of title insurance. It removes three limits: the requirement that the letters be commonly accepted by private institutional investors in the local market, the exclusion of Texas Section 50(a)(6) loans and the exclusion of loans signed under a power of attorney. The company says the changes retain its title protection requirements.
The other Selling Guide changes in the same announcement
SEL-2026-09 is not only about tenants. It removes certain verbal verification of employment methods, clarifies how lenders treat Schedule K-1 income when a borrower owns less than 25% of a business, and updates income continuance requirements. It also clarifies how lenders deliver employment offers or contracts, replaces the manual PDF Form 482 with a self-service application for a seller’s designation of wire transfer instructions, and eliminates the requirement for Form 360.
Most of these take effect at once. The K-1 change is the exception, applying to loan applications dated on or after Dec. 2, 2026. For a seller with a tenant, the practical difference is narrower: a buyer’s lender can now accept a statutory tenant right without treating it as a title impediment, but still has to check for any recorded right.
Checking a tenant-occupied sale against the guide
Fannie Mae publishes the full text on its announcement page, and the Selling Guide section on title exceptions is where a lender or title agent checks whether a given right is acceptable. The first thing to establish for any tenant-occupied sale is whether the local law applies to that property at all, since some laws cover only multi-unit buildings or certain districts. The second is whether anything about the tenant’s purchase rights is recorded in the land records, because only a recorded right stays under the old requirements.
A statute’s notice and offer steps are set by the city or state, not by Fannie Mae, so the update does not shorten the 15- or 30-day windows or the months that proceedings can add to a sale. It only means a loan is not automatically ineligible because those steps exist.
Fannie Mae’s own wording is the last word on the hardest cases: it says recorded rights of first refusal remain subject to its existing Selling Guide requirements. A statute can give a tenant the first chance to buy without affecting the loan, but a recorded right still has to meet the title test in section B7-2-05, which allows a party in possession only if its rights do not include a recorded right of first refusal.
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This article was produced with AI assistance and reviewed by The Money Overview’s editorial team.
