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The recent changes to the condominium lending standards imposed by Fannie Mae and Freddie Mac are beginning to have a significant impact on associations as well as unit owners and prospective buyers.
The changes from the mortgage industry giants, which are government-sponsored enterprises that help keep the U.S. housing market running smoothly by buying mortgages from lenders, are aimed at addressing concerns about aging buildings, inadequate reserves, deferred maintenance, and insurance coverage. For buyers and existing owners, they directly affect whether individual units qualify for conventional mortgage financing, which means they will have a significant impact on the ability to purchase, sell or refinance many residences.
More Extensive Project Reviews
As of August 3, 2026, Fannie Mae has terminated its Limited Review process, and Freddie Mac has similarly moved away from its streamlined review. Condominium communities that previously qualified for a less intensive review are now subject to full reviews unless they qualify for a waiver or another applicable review option.
Full reviews place greater emphasis on the condominium project itself. Lenders may ask for information concerning the association’s budget, reserves, insurance, delinquent assessments, litigation, building condition, and other matters. In practical terms, strong credit and income by individuals hoping to buy or refinance may not be sufficient if the condominium project does not satisfy the applicable requirements.
This change has made accurate and readily available association records of the upmost importance. Associations should be prepared to respond to lender questionnaires and provide current financial, insurance, reserve and building-condition information.
Increased Reserve Requirements
Perhaps the most consequential change for associations is the expected increase in required replacement reserves. Beginning January 4, 2027, Fannie Mae and Freddie Mac will increase the minimum replacement-reserve allocation for projects which are subject to a full review from 10% to 15% of the association’s annual budgeted assessment income.
Associations may therefore need to reevaluate their annual budgets, reserve funding strategies, and long-term capital plans. A failure to maintain the increased reserves could make financing more difficult for individual unit owners, not to mention contributing to higher assessments in the future.
Insurance Changes
The 2026 updates also eliminate the requirement that condominium master policies insure roofs on a replacement-cost basis, and the required documentation for determining replacement costs and deductibles has also been revised.
For unit owners, these changes make it especially important to understand the relationship between the association’s master policy and the owner’s individual HO-6 policy. Under the updated Fannie Mae requirements, an individual policy may be required where the master policy does not cover portions of the unit interior or where the master policy has a per-unit deductible.
Associations should therefore review their insurance policies with their insurance professionals and legal counsel to determine whether coverage remains consistent with both their governing documents and the new lending requirements.
Impact on Buyers and Owners
Before entering into a purchase contract, condominium buyers should now ask whether the project is eligible for conventional financing, and whether their lender has identified concerns involving reserves, insurance, deferred maintenance, special assessments or litigation.
Existing owners considering refinancing may also face a different review today. Project eligibility can change as the association’s financial condition, insurance coverage or physical condition changes.
Buyers and sellers should also bear in mind that Fannie has expanded its waiver of project review to certain new and established projects containing 10 or fewer units, and it eliminated the 50% investor-concentration limit for certain established projects. For Florida condominiums, the agency has also eliminated its separate Project Eligibility Review Service requirement for new or newly converted projects, so qualifying projects can now proceed through lender-delegated full reviews.
The 2026 updates have made due diligence vitally important for buyers and owners. Understanding the financial and physical condition of a condominium project before purchasing or refinancing can help avoid an unexpected financing denial, and the information may reveal larger issues that could affect property values and the long-term costs of ownership.
The 2026 changes to the condominium financing requirements from the two national mortgage industry leaders have sent a clear message to condominium associations that lending eligibility is increasingly tied to sound governance, adequate reserves, appropriate insurance, and well-maintained buildings. Associations should carefully review and consider their budgets, reserve studies, insurance policies, inspection reports, and responses to lender questionnaires before a financing problem arises.