Key takeaways
On March 18, 2026, Fannie Mae and Freddie Mac announced condo project and insurance changes. Limited Review ended for loan applications dated on or after August 3, 2026, and the reserve minimum rises to 15% of budgeted assessment income on January 4, 2027. Condo associations that fall short risk losing buyer access to conventional mortgage financing.
- Since August 3, 2026, lenders can no longer use Limited Review, so most condo sales require a full project review; projects of 10 units or fewer may qualify for a waiver.
- For loan applications from January 4, 2027, reserves must be at least 15% of budgeted assessment income, up from 10%; a lower budget qualifies only if it funds a recent reserve study at its highest recommended level.
- Roofs no longer need replacement cost coverage and inflation guards are no longer required, but since July 1, 2026, per-unit master policy deductibles are capped at $50,000.
- From January 1, 2027, loan servicers must verify insurance annually, monitor coverage reductions, and remind borrowers to maintain policies.
Written for: HOA & condo board members, High-rise boards, Community association managers
New Fannie Mae & Freddie Mac Rules Are Coming. Is Your Community Ready?
Published by SmartProperty | March 2026 | Updated October 2026
October 2026 update: The July 1 deductible cap and the August 3 end of Limited Review are now in effect, and so is the rule that a reserve study used to justify reserves below the minimum must be funded at its highest recommended level. Still ahead: servicer insurance monitoring on January 1, 2027, and the 15% reserve minimum for loan applications dated on or after January 4, 2027. Sources: Fannie Mae Lender Letter LL-2026-03 and Freddie Mac Bulletin 2026-C.
On March 18, 2026, Fannie Mae and Freddie Mac announced sweeping changes to condominium project standards and insurance requirements. For community association boards, the stakes are high.
If your community isn't positioned to meet these new standards, buyers in your building could lose access to conventional mortgage financing. That affects property values, unit sales, and your community's long-term financial health.
Here's what changed, what it means for your board, and what to do now.
Is your community exempt? Not all associations will be subject to every requirement outlined in these updates. Property managers and HOA boards should review the full Fannie Mae Lender Letter directly to determine whether their project qualifies for a waiver or exemption — particularly smaller communities of ten units or fewer that may be eligible for the expanded Waiver of Project Review.
The Limited Review Process Is Gone
For loan applications dated on or after August 3, 2026, lenders can no longer use Fannie Mae's Limited Review, and Freddie Mac retired its equivalent Streamlined Review on the same date. Limited Review was the most common path for condo loans, so most sales now require a full project review, meaning more documentation, more lender questionnaires, and more scrutiny of your association's finances.
This isn't a minor administrative update. It's a structural shift that places significantly more accountability on boards to demonstrate that their community is financially sound.
Projects of 10 units or fewer may qualify for a Waiver of Project Review (previously limited to 2-4 units). But for the majority of associations, the burden of proof just increased considerably.
Reserve Requirements Are Getting Stricter: 15% From January 4, 2027
This is the most consequential change for most boards. For loan applications dated on or after January 4, 2027, a project under full review must meet:
- A minimum of 15% of annual budgeted assessment income allocated to replacement reserves (up from 10%)
If your association already budgets 15% or more of assessment income for reserves, you meet the standard. If it budgets less, the lender can rely on a reserve study completed within the past three years, but only if the budget funds the study's highest recommended reserve contribution. Baseline funding is no longer accepted; that part of the change already applies to loan applications dated on or after August 3, 2026.
Boards that wait until late 2026 to address this will face a compressed timeline for making material changes to budgets, assessments, and long-term capital plans. Communities that act now have time to do it strategically.
Insurance Requirements: Some Relief, New Obligations
Not everything in this update is a burden. Fannie Mae and Freddie Mac have relaxed several insurance requirements that had created real obstacles for condo communities in today's difficult insurance market:
- More forms of evidence are accepted to show the master policy covers 100% of replacement cost
- Roofs no longer have to be insured on a replacement cost basis
- Inflation guard requirements are no longer mandatory
This is meaningful relief for communities that previously found themselves ineligible for conventional financing due to insurance constraints.
However, since July 1, 2026, when a master policy carries a per-unit deductible, that deductible can be no more than $50,000 per unit, and each owner's HO-6 policy must cover at least the deductible amount. Communities carrying higher per-unit deductibles should review their policies with their broker.
Servicer Oversight Increases Starting January 1, 2027
Loan servicers will now be required to verify insurance annually, monitor for coverage reductions, and remind borrowers to maintain policies. This creates a layer of ongoing scrutiny throughout the life of a loan — not just at the point of sale.
Boards should expect more consistent communication from servicers and be prepared to provide current documentation on demand.
What Your Board Should Do Now
These changes require deliberate action, not a reactive scramble before January. Here's a practical framework:
1. Review your reserve study and funding methodology.
If you are using baseline funding, that approach is no longer acceptable under the new standards. Work with your reserve study provider to understand what the new minimum requires and what the highest recommended funding level looks like for your community.
2. Evaluate your insurance coverage.
Engage your insurance professional to assess your current policy against the new requirements — particularly the $50,000 per-unit deductible cap in effect since July 1, 2026.
3. Prepare your documentation infrastructure.
Full project reviews require detailed documentation. Organize your financials, reserve study, and governance records now, before the next transaction in your building triggers a review.
4. Build a compliance timeline.
Already in effect: July 1, 2026 (deductible cap) and August 3, 2026 (end of Limited Review and of baseline funding as a reserve study alternative). Still ahead: January 1, 2027 (servicer changes) and January 4, 2027 (15% reserve minimum). Get ahead of the remaining dates now.
The Risk of Waiting
Deferred planning doesn't disappear. It compounds.
A community that waits to address reserve funding gaps may find itself facing a special assessment, a budget restructuring, or — worst case — ineligibility for conventional mortgage financing at the precise moment a unit owner needs to sell.
The boards that navigate this well won't be the ones who react in December 2026. They'll be the ones who have already started planning.
SmartProperty Can Help
SmartProperty works with community association boards to bring clarity and structure to exactly this kind of challenge — reserve funding analysis, capital planning, and the financial documentation boards need to demonstrate long-term stability to lenders, homeowners, and regulators.
If your board is unsure where you stand under the new Fannie Mae and Freddie Mac standards, don't wait for a transaction to surface the gap.
Contact SmartProperty today to assess your reserve funding position and build a plan that keeps your community financeable.
This post is based on guidance issued by Fannie Mae and Freddie Mac on March 18, 2026, and CAI's accompanying analysis. SmartProperty recommends consulting with qualified reserve study professionals, insurance advisors, and legal counsel to evaluate your community's specific situation.
