Fannie Mae & Freddie Mac Condo Guideline Changes (2026–2027) | HOA Guide

Fannie Mae & Freddie Mac have made changes to conventional financing guidelines for condos: What your HOA can expect and what you need to do about it

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On March 18, 2026, Fannie Mae and Freddie Mac announced new guidelines regarding condominium financing. These changes affect how condominium communities qualify for conventional mortgage financing. If you're an HOA and haven't heard of these changes, then now would be a great time to educate yourself.

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The good news: there is still plenty of time to prepare. The bad news: a major change (an increase in reserve requirements) takes effect on January 4th, 2027.

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Our company specializes in HOA financing. We'd like to help board members and property managers understand the changes taking place, what they mean for your condominium community, and what actions your community needs to take.

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Three key dates at a glance:

March 18, 2026

Change: Removal of investor cap; allowance of ACV roof insurance; expanded small condo waiver

Effect: Already in effect. Some buildings are now eligible for conventional loans

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August 3, 2026

Change: Limited review eliminated; reserve study must use full funding level

Effect: Longer closing timelines; more scrutiny on every transaction

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January 4, 2027

Change: Increase in reserve allocation minimum from 10% to 15%

Effect: HOAs below 15% risk losing warrantable status; dues may be required to increase

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Beginning January 4, 2027, the minimum reserve allocation rises to 15% of an association's annual assessment income, up from 10%. Fannie Mae announced the increase in Lender Letter LL-2026-03, issued March 18, 2026, and it applies to loan applications dated on or after January 4, 2027. The change impacts nearly every association because when a condominium building loses its warrantable status due to an association failing to maintain the required reserve level, buyers will no longer qualify for conventional financing through Fannie Mae or Freddie Mac. As such, loss of warrantable status directly impacts resale value for individual unit owners and decreases the number of potential buyers in the market.

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Associations who currently fund their reserves at the 10% floor are likely going to have to decide whether to raise member fees with a larger-than-previously-planned dues increase, or obtain a reserve fund loan.

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Action items for boards:

• Find your annual budget line item for reserve contributions and divide it by your total annual assessment income, which is the figure the guidelines use. If the result is below 15%, read the reserve study section below before assuming you need a plan.

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No more limited reviews: all transactions will be thoroughly reviewed starting August 3rd, 2026

As of August 3rd, 2026, the existing limited review process used by approximately 40% of condo transactions will cease to exist. From this date forward, all condo transactions will require either a full review or a qualifying waiver.

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During a full review, lenders will fully examine your association's financial condition including:

• Funding levels of your reserves
• Coverage under master insurance policies
• Delinquent accounts
• Pending litigation

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Whereas any of these items would have been overlooked and/or passed through the limited review without raising red flags, they will now be discovered and may result in buyers being unable to close on their units.

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Property managers should prepare for receiving additional documentation requests from lenders and expect extended closing times. Consider beginning the proactive collection of your standard documents for each building where there is anticipated sales activity, so you are better positioned if you receive the above-mentioned lender requests.

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Action items for property managers:

Create a standard document package now:

• Current budget
• Reserve study
• Master insurance policy
• Delinquency report
• Litigation disclosure

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Being prepared prior to receiving requests from lenders will save weeks of closing time and eliminate friction for sellers and buyers.

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Reserve studies must now include full funding levels, not only the minimums

One of the items changed by Fannie Mae and Freddie Mac is related to the completion of reserve studies. Reserve study companies provide different funding options: baseline (minimum), threshold (moderate), and full funding (recommended). Many associations have selected the lowest option possible in order to minimize monthly dues.

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With the announcement made on August 3rd, 2026, both Fannie Mae and Freddie Mac will only accept reserve studies that utilize the recommended funding option. Furthermore, reserve studies must have been completed within the last thirty-six (36) months. If your reserve study is dated prior to thirty-six (36) months, or if you've selected a baseline funding option, it will be flagged during the lender's full review, which could jeopardize a unit sale.

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Both requirements are in the guides themselves: Fannie Mae's Selling Guide B4-2.2-02 and Freddie Mac's Seller/Servicer Guide Section 5701.5.

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Action items for boards:

• Verify the age of your reserve study. If it is older than thirty-six (36) months, commission a new one.
• Ensure your new study utilizes the recommended funding option (not baseline).

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A current reserve study can satisfy the requirement on its own

The percentage is not the only route. Fannie Mae's Selling Guide lets a lender rely on a reserve study instead of the reserve allocation percentage, and Freddie Mac's Seller/Servicer Guide carries the same provision. Where a study qualifies, the percentage test does not have to be met separately.

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Three conditions have to hold at once:

• The study was completed within the last three years.
• Your funded reserves meet or exceed what the study itself recommends.
• The study does not use the baseline funding method. Fannie Mae's Selling Guide says plainly that baseline funding “may not be used to waive” the reserve requirement.

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Those are the same conditions the August 2026 changes tightened, read from the other side. An association that commissions a current study on the recommended funding option, and then funds to it, has answered the reserve question whatever its percentage happens to be.

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We review reserve studies. We do not prepare them. If you already have one, the first useful question is not how much to raise dues. It is whether the study you are holding already satisfies the requirement. A board can answer that in an afternoon with the study in front of it, and it is worth answering before modelling a dues increase or a loan.

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Action items for boards:

• Check your most recent study's date. Older than three years and it cannot be relied on.
• Check which funding option it used. Baseline does not qualify, whatever its date.
• Compare your actual reserve balance against the study's own recommendation. Meeting or exceeding it is the test.
• If all three hold, your position may be stronger than your reserve percentage suggests. Confirm it with your lender before planning around a shortfall.

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Some buildings are now eligible under these new changes. They are also important

Two other recent changes opened doors for communities that were previously ineligible for conventional mortgage financing:

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1. Fifty percent (50%) investor concentration limit removed. Buildings in urban markets where more than fifty percent (50%) of the units are owned by investors can now be considered eligible for conventional mortgage financing. If your community was previously deemed non-warrantable due to this condition, then it may be beneficial to reevaluate your community's status.
2. Small condo waiver expanded to cover buildings with up to ten (10) units. Previously this waiver applied only to extremely small projects. All smaller associations can now benefit from a streamlined review process.

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What boards and property managers should do right away

Below is a practical checklist to assist you in developing your strategy for the next few weeks:

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• Calculate your current reserve allocation percentage from your annual budget
• Determine when your last reserve study was completed. If it has exceeded thirty-six (36) months or utilized baseline funding options instead of full funding options, commission a new study
• Verify your master insurance policy provides replacement cost coverage for everything excluding roofs
• Prepare a condo questionnaire packet for lenders in advance of anticipated sales
• If your association's reserve funds are currently below fifteen percent (15%), model out your options: higher dues, special assessment, or a reserve fund loan
• If your building was previously deemed non-warrantable due to investor concentration limits, confirm your building's eligibility with a lender

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Do you have questions about your association's compliance status?

We specialize in structuring financing solutions specifically tailored to fit how your condominium community operates, whether that includes bridging a reserve shortfall, preventing a large special assessment, or merely getting ahead of a compliance deadline.

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Schedule a free twenty-minute consultation with our team.