Fannie Mae and Freddie Mac Condo Requirements Are Changing: What Boards Need to Know

If you serve on a condominium Board, the financial decisions you make today could affect more than next year’s budget. They may also affect whether owners can sell or refinance their homes.

In March 2026, Fannie Mae and Freddie Mac announced significant updates to condominium project standards, including changes to reserve funding, reserve studies, project reviews, insurance requirements, and overall project eligibility. Some changes are already in effect, another major set took effect August 3, 2026, and the new reserve funding requirement arrives January 4, 2027.

For Boards, the takeaway is simple: lenders are looking more closely at the financial health and physical condition of condominium communities.

Here’s what you need to know — and what your Board should be doing now.

Why Fannie Mae and Freddie Mac Requirements Matter to Your Community

Fannie Mae and Freddie Mac don't manage condominium associations, and these requirements aren't new state laws governing how Boards operate.

They do, however, play an enormous role in the U.S. mortgage market.

When someone buys or refinances a condominium using conventional financing, the lender may need to determine whether the condominium project itself satisfies Fannie Mae or Freddie Mac eligibility standards. Fannie Mae specifically requires lenders to evaluate project characteristics because the financial condition, physical condition, insurance and other characteristics of a project can affect the mortgage secured by an individual unit.

That means a financially healthy buyer can potentially run into financing problems because of an issue at the association level.

For Boards, that makes reserve funding, maintenance planning, insurance and recordkeeping part of a much larger conversation about protecting owners and maintaining the marketability of homes within the community.

The Three Dates Boards Should Know

March 18, 2026: Fannie Mae and Freddie Mac Announce the Changes

Fannie Mae published Lender Letter LL-2026-03 on March 18, announcing updates to project standards and property insurance requirements. The changes were developed in alignment with Freddie Mac and in coordination with the Federal Housing Finance Agency.

The updates include both stricter financial requirements and some changes intended to simplify or provide greater flexibility in certain project reviews and insurance requirements.

August 3, 2026: Project Reviews and Reserve Studies Changed

One of the biggest changes for established condominium communities is the retirement of Fannie Mae's Limited Review process and Freddie Mac's comparable Streamlined Review path for applicable loan applications.

Fannie Mae confirms that Limited Review is retired for loan applications dated on or after August 3, 2026.

This matters because a Limited Review did not require the same level of examination of a project's finances as a Full Review.

For many condominium transactions, lenders will now need to perform a more comprehensive project review unless the project and loan qualify for another available review option or exemption.

At the same time, requirements surrounding reserve studies became more stringent.

When a reserve study is being used to demonstrate adequate reserves, baseline funding can no longer be used to establish reserve adequacy for applications on or after August 3. If a reserve study provides multiple recommended funding levels, the project's budget must fund the highest recommended reserve allocation applicable under the new requirements.

In other words, simply having a reserve study sitting in a folder isn't necessarily enough. Boards need to understand what the study recommends — and whether the association's actual budget aligns with it.

January 4, 2027: Minimum Reserve Allocation Increases to 15%

This is likely the change that will have the greatest direct impact on Board budgeting.

For applicable condominium project reviews, Fannie Mae and Freddie Mac are increasing the minimum annual budgeted replacement reserve allocation from 10% to 15% of annual budgeted assessment income, effective for loan applications received on or after January 4, 2027.

That's a 50% increase in the minimum percentage allocated to reserves.

For example, if an association has $1 million in annual budgeted assessment income:

Previous 10% allocation: $100,000New 15% allocation: $150,000

That's an additional $50,000 per year directed toward replacement reserves.

Depending on the association's current budget, Boards may need to evaluate assessments, expenses and long-term capital planning well before January.

Reserve Studies Are Becoming Even More Important

Reserve funding isn't just about hitting a percentage.

Fannie Mae explained that it has observed a correlation between condominium projects with underfunded capital reserves and projects requiring critical repairs. Inadequate reserves can leave associations without the resources necessary to maintain the property or address unexpected expenses, potentially resulting in substantial special assessments or higher regular assessments for owners.

That makes the reserve study increasingly important as a financial planning document.

Boards should know:

• When was our last reserve study completed?

• What funding methodology does it use?

• What contribution does it recommend?

• Are we actually following that recommendation?

• Have major repairs or replacements occurred since the study was completed?

• Are there significant projects coming up that aren't adequately reflected in the study?

  
  

Most importantly, Boards should understand that baseline funding is no longer acceptable when a reserve study is being relied upon as an exception to the standard reserve requirement for applicable applications after August 3, 2026.

Deferred Maintenance and Critical Repairs Matter, Too

A healthy reserve account doesn't erase physical problems with the property.

Project eligibility standards also examine the physical condition of condominium projects. Fannie Mae's project standards already include requirements addressing critical repairs and unsafe conditions, and its 2026 announcement specifically connects inadequate reserve funding with projects experiencing critical repair needs.

For Boards, this reinforces the importance of documenting and addressing known issues rather than repeatedly postponing them.

That includes questions such as:

Are there known structural concerns?

Are significant repairs being deferred because the association doesn't have the money?

Are there outstanding inspection findings?

Are there evacuation orders or unsafe conditions?

Are major components approaching the end of their useful lives without a funding plan?

Boards should work with their management team and appropriate engineering, reserve, insurance, financial and legal professionals to understand and document these issues.

Insurance Is Part of the Conversation

The March 2026 updates also revised several property insurance requirements.

Some of those changes actually provide associations and property owners with greater flexibility. For example, the agencies made changes regarding replacement-cost verification, roof coverage and certain deductible requirements. Fannie Mae describes the broader update as an effort to simplify requirements, reduce complexity and provide additional flexibility while still managing project risk.

That doesn't mean Boards should stop paying attention to insurance.

Lenders still need to confirm that projects satisfy applicable insurance requirements, and Freddie Mac specifically identifies adequate insurance coverage as one of the risks evaluated during condominium project review.

Boards should review master policies with their insurance professionals and make sure current policies and supporting documentation can be produced when requested.

Some Requirements Have Become More Flexible

Not every 2026 change makes financing more restrictive.

Fannie Mae expanded eligibility for its Waiver of Project Review to include certain new and established condominium projects with 10 or fewer units. For projects with five to 10 units, additional conditions apply, including that the project cannot be part of a master association.

Fannie Mae also retired its investor concentration limit for established projects reviewed under Full Review for investor loans.

Freddie Mac similarly retired its 50% owner-occupancy requirement for established condominium projects, although owner-occupancy requirements remain for new projects.

The important point is that these aren't simply "stricter condo rules." They're a broader overhaul of how project risk is evaluated, with increased attention to financial sustainability alongside simplification in certain other areas.

What Happens If Your Community Doesn't Meet the Requirements?

This is where Boards should pay attention.

Failing to meet a Fannie Mae or Freddie Mac project requirement doesn't mean homeowners suddenly lose their homes, and it doesn't necessarily mean that no financing whatsoever is available.

It can, however, make conventional financing more difficult or unavailable for a particular transaction.

If a lender determines that a project isn't eligible under the applicable Fannie Mae or Freddie Mac requirements, a buyer or owner may need to pursue another financing option.

The potential ripple effect matters.

Fewer financing options can mean a smaller pool of prospective buyers. Transactions may take longer. Owners trying to refinance may encounter additional hurdles. Buyers may discover an association-level problem after they're already under contract.

That is why this is ultimately more than a mortgage-industry issue.

It's a community planning issue.

What Should Condominium Boards Do Now?

With the August 3 changes already in effect and the 15% reserve requirement approaching in January, Boards should use the remainder of 2026 to get organized.

Start with five areas:

1. Review Your 2027 Budget

Determine what percentage of annual budgeted assessment income is currently being allocated to replacement reserves.

If it's below 15%, don't wait until January to start the conversation.

2. Pull Out Your Reserve Study

Check its age, methodology, recommendations and assumptions.

More importantly, compare the study's recommended funding to what you're actually budgeting.

3. Review Deferred Maintenance

Create a clear picture of known maintenance, structural and capital needs.

If work has been deferred, understand why, what it will cost and how the association plans to address it.

4. Review Insurance

Work with your association's insurance professional to confirm that master policies are aligned with current requirements and that the association can quickly provide documentation to lenders when requested.

5. Get Your Documents Organized

The days of scrambling to find financial statements, insurance documents, budgets and reserve information after a homeowner has a buyer under contract should be over.

Boards and management teams should have a process for maintaining and providing current:

• Annual budgets

• Financial statements

• Reserve studies

• Insurance policies

• Inspection and engineering reports

• Information about special assessments

• Documentation regarding major repairs

• Association governing documents

• Other lender-requested project information

  
  

The easier it is to provide accurate information, the easier it becomes to respond when a lender begins reviewing the community.

Don't Wait Until a Homeowner Is Trying to Sell

The biggest mistake a Board can make is assuming this is something the lender, realtor or homeowner will deal with when the time comes.

By then, the association may be trying to solve a years-long reserve or maintenance problem in the middle of someone's home sale.

Instead, Boards should use these changes as an opportunity to ask a bigger question:

Is our community financially and operationally prepared for the long term?

Adequate reserves help pay for roofs, elevators, pavement, building systems and other major components. Preventive maintenance can reduce the likelihood that small problems become expensive emergencies. Good documentation helps Boards make better decisions and makes it easier to respond when lenders, owners and professionals need information.

The new Fannie Mae and Freddie Mac requirements simply make those practices even more important.

Get the Full Breakdown + Board Resources

There's a lot here, and your Board doesn't have to sort through it alone.

The Nabo Group recently hosted a Board 101 session dedicated to the new Fannie Mae and Freddie Mac requirements, what they mean for condominium communities, and what Boards should be doing to prepare.

We've also put together resources to help your Board turn the requirements into actionable next steps.

Watch the recording and download the Board resources here:

Watch Board 101 + Download the Resources →

The January 2027 deadline may still feel months away, but budgeting, reserve planning and major maintenance decisions don't happen overnight.

Now is the time to make sure your community is ready.

This article is intended for general educational purposes and is not legal, lending, accounting, reserve-study or insurance advice. Requirements may vary based on the project, loan and applicable review type. Boards should consult their association's professional advisors regarding their specific circumstances.