Fannie Mae and Freddie Mac are rolling out changes that will reshape how condominium associations and co‑ops manage their budgets — and how easily buyers and owners can secure conventional financing. Starting Jan. 4, 2027, condo associations will be required to allocate at least 15% of their annual budget to reserves, up from the longstanding 10%. While that may sound like a small shift, it carries big implications for buildings, boards and homeowners.
The goal behind the increase is to strengthen financial stability and ensure buildings have enough money set aside for capital projects and deferred maintenance. In recent years, concerns about aging infrastructure have pushed regulators to take a closer look at how well associations are preparing for major repairs. By increasing the reserve requirement, Fannie and Freddie aim to reduce the risk of underfunded buildings and, by extension, reduce lending risk.
The timeline matters here. Lenders are already updating their guidelines, with many treating July 1, 2026, as the practical start date for the 15% requirement. By Jan. 4, 2027, any condo undergoing a full review must meet the new threshold unless it is fully funded according to a professional reserve study. And those reserve studies are becoming more important: Lenders will increasingly require associations to follow the highest recommended funding level rather than a baseline estimate.
Another significant change happens Aug. 3, 2026, when limited project review is phased out for buildings with more than 10 units. After that, full project reviews (and the detailed documentation that comes with them) will be mandatory. Associations that fall short on reserves or fail to follow their reserve study could find their units ineligible for conventional financing, affecting both purchases and refinances.
These changes will likely put pressure on boards to increase reserve contributions, even if that means raising monthly dues. The tradeoff is financial stability and continued access to Fannie‑ and Freddie‑backed loans, which remain the backbone of the conventional mortgage market.
Some good news: The longstanding 50% investor‑owner cap has been removed, effective immediately. Buildings no longer need to maintain a majority of owner‑occupants to qualify for conventional financing, offering more flexibility for both buyers and associations.
Overall, and despite potential growing pains, these changes signal a broader push toward safer, better‑funded communities. To view all policy updates, visit guide.freddiemac.com/app/guide/revisions.
Kim Foemmel
Foem
mel Fine Homes
1 Lumber Street, Suite 207C
Hopkinton, MA
(508) 808-1149
Kim.Foemmel@gmail.com
FoemmelFineHomes.com
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