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On March 18, 2026, the Federal Housing Finance Agency (FHFA) revised the lending guidelines for the Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, and the Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac.
Of particular importance to condominium associations is the increased reserve funding requirement. Effective January 1, 2027, the revised Guidelines increase the minimum reserve funding requirement from 10% to 15% of the annual budgeted assessment income (which can exclude special assessment income).
The revised Guidelines also:
- Prohibit the “baseline funding” method for reserve studies, which allows reserves to approach zero (effective August 3, 2026).
- Set the maximum allowable per-unit deductible for all required property insurance perils covered by a master property insurance policy at $50,000 per unit (effective July 1, 2026).
- Retire the 50% investor concentration limit for established condominiums.
The revised Guidelines also include additional changes to master policy coverage requirements and HO-6 policies, which we recommend that you discuss with the association’s insurance broker/agent.
Fannie Mae’s Lender Letter 2026-03 contains the updated project standards and property insurance requirements and is available at https://singlefamily.fanniemae.com/media/44986/display
While the Lending Guidelines do not impose legal obligations on condominium associations, failure to comply may limit financing opportunities for prospective purchasers. Because Fannie Mac and Freddie Mac support approximately 60% to 70% of all residential mortgages, compliance with these Guidelines is strongly recommended to help ensure that future sales transactions are not adversely affected. As many of you are aware, Fannie Mae has been strictly enforcing its requirements and has deemed numerous condominium projects ineligible for financing due to noncompliance. Accordingly, we recommend that your association review its insurance coverage, reserve studies, and reserve funding practices to confirm compliance with the revised Guidelines.
If you have questions regarding the updated Lending Guidelines or would like assistance evaluating your association's compliance, please contact one of our Community Association attorneys.
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