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

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.

The good news: there is still time to prepare for January. The bad news: part of the tightening already applies. For applications dated on or after August 3, 2026, the lighter review path is gone, and a budget that relies on a reserve study has to include the study's highest recommended allocation, with baseline funding no longer accepted. The reserve allocation minimum then rises on January 4, 2027.

Our company specializes in HOA financing. This guide is written for boards and property managers: what changed, when, and what it means for your association's budget, reserves and capital projects.

Fannie Mae and Freddie Mac reserve requirements

• 15% reserve allocation. For applications dated on or after January 4, 2027, the minimum reserve allocation rises from 10% to 15% of budgeted assessment income, which reaches most condominium projects above ten units.
• Highest recommended allocation. For applications dated on or after August 3, 2026, a budget that relies on a reserve study must include the study's highest recommended allocation.
• Baseline funding. Baseline funding is no longer accepted.
• Unit mortgages, not your association's loan. These guidelines apply to unit mortgages, not to your association's own loan. A project that does not meet them may not be eligible for Fannie Mae- or Freddie Mac-backed unit mortgages, which can make units harder to sell or refinance.

For what lenders look at when the association itself borrows, see our guide to HOA loan requirements.

Three key dates at a glance:

Fannie Mae and Freddie Mac are both raising the minimum reserve allocation from 10% to 15% of budgeted assessment income for applications dated on or after January 4, 2027, which reaches most condominium projects above ten units. The detail is in Fannie Mae's Lender Letter LL-2026-03 and Freddie Mac's Bulletin 2026-C, both issued March 18, 2026. These guidelines apply to unit mortgages, not to your association's own loan. A project that does not meet them may not be eligible for Fannie Mae- or Freddie Mac-backed unit mortgages, which can make units harder to sell or refinance.

For your board this is a budget question. An association budgeting reserves at the 10% floor will need a larger allocation to meet the new 15% minimum, and a loan does not change that, because loan proceeds are not a budgeted reserve contribution. Where a loan helps is the project itself: financing the work leaves reserve cash in place, and many lenders will allow loan proceeds to fund or replenish reserves, including reserves drawn down to pay for project costs, though policies vary by lender. If you want to know what financing your project would cost, ask us. We know which lenders in our national network will look at a deal like yours, and we take it to them. There is no upfront cost, and we are paid at closing.

Short of the 15% with a project coming?

The new allocation is a budget line, and a loan does not count toward it. What a loan can do is pay for the work itself, so the reserves you are building stay in reserves. Book a free consultation: we'll tell you what a lender is likely to flag in your file and how much the association might reasonably borrow. Our free capital planning tool lets you list the work ahead and what it's likely to cost. There is no upfront cost, and we are paid at closing.

Get a free consultation or open the capital planning tool.

Action items for boards:

• Find your annual budget line item for reserve contributions and divide it by your budgeted 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.

No more limited reviews: a fuller review for condo transactions starting August 3rd, 2026

As of August 3rd, 2026, the existing limited review process will cease to exist. From this date forward, established projects that used the limited review need a full review at Fannie Mae or, where the project qualifies, a waiver of project review. Freddie Mac's paths are its Established Condominium Projects review, Reciprocal Review, or Exempt From Review.

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

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

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.

Action items for property managers:

Create a standard document package now:

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

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

Budgets that rely on a reserve study must use its highest recommended allocation

One of the items changed by Fannie Mae and Freddie Mac is related to the completion of reserve studies. Reserve study providers offer a range of funding strategies, and the industry generally describes them as baseline, threshold and full funding, from the least conservative to the most. Those are the providers' own terms rather than agency categories. Many associations have chosen the least conservative option in order to minimize monthly dues, and that is the one the agencies no longer accept: baseline funding, the method that lets the reserve balance approach but never fall below zero.

The announcement was made on March 18, 2026. August 3 is the application-date threshold: for loan applications dated on or after August 3, 2026, both Fannie Mae and Freddie Mac require a budget that relies on a reserve study to include the study's highest recommended reserve allocation, and baseline funding is no longer permitted. Separately, and not part of these changes, Fannie Mae's Selling Guide lets a lender rely on a reserve study only if it was completed within three years of the date the lender approves the project. A study older than three years, or a budget built on baseline funding, can be flagged in the lender's project review. The baseline restriction is new; the three-year age limit is not.

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.

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 budget includes the study's highest recommended reserve allocation. Baseline funding is not permitted.

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.

Among the guide's conditions, these four have to hold at once:

• The study was completed within the last three years.
• Your budget includes the study's highest recommended reserve allocation.
• The study shows that your funded reserves meet or exceed its own recommendations.
• 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.

Those are the same conditions the August 2026 changes tightened, read from the other side. An association with a current study that budgets its highest recommended allocation, and whose funded reserves meet the study's recommendations, may have answered the reserve question whatever its percentage happens to be.

We do not prepare reserve studies. 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 modeling a dues increase or a loan.

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 budgeted reserve contribution against the study's highest recommended allocation; the budget must include it. The study must also show that your funded reserves meet or exceed its own recommendations.
• If all three hold, your position may be stronger than your reserve percentage suggests. Confirm it with your management company or a lender originating unit mortgages in your building before planning around a shortfall.

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:

1. Fifty percent (50%) investor limit retired for established projects. Fannie Mae retired its 50% investment property concentration limit, and Freddie Mac its 50% owner-occupancy requirement, for investment-property loans in established projects. Presale requirements for new projects still apply. If your community was previously deemed non-warrantable due to this condition, then it may be beneficial to reevaluate your community's status.
2. The exemption for small projects was expanded. Fannie Mae's Waiver of Project Review now reaches projects with ten or fewer units, and Freddie Mac's Exempt From Review reaches two-to-ten-unit projects. For five to ten units, both agencies require that the project not be part of a master association. Other conditions apply, so don't read this as the full list.

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:

• Calculate your current reserve allocation percentage from your annual budget
• Determine when your last reserve study was completed. If it is older than thirty-six (36) months, commission a new one. Either way, make sure your budget includes the study's highest recommended reserve allocation
• 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 budgeted reserve allocation is currently below fifteen percent (15%) of budgeted assessment income, model out your options: higher dues, a special assessment, or a loan for the project itself. A loan pays for the work; it doesn't count toward the 15%.
• If your building was previously deemed non-warrantable due to investor concentration limits, confirm your building's eligibility with your management company or a lender originating unit mortgages in your building
• Don't assume an earlier project approval carries you through. Freddie Mac's bulletin says a project review completed before these dates must still be confirmed against the new requirements for applications received after them.

Short of the 15% with a project coming?

The new allocation is a budget line, and a loan does not count toward it. What a loan can do is pay for the work itself, so the reserves you are building stay in reserves. Book a free consultation: we'll tell you what a lender is likely to flag in your file and how much the association might reasonably borrow. Our free capital planning tool lets you list the work ahead and what it's likely to cost. There is no upfront cost, and we are paid at closing.

Get a free consultation or open the capital planning tool.