Fannie Mae and Freddie Mac released significant updates to condominium lending and project‑eligibility standards on March 18, 2026. Several of these changes directly impact condominium governance, budgeting, insurance requirements, reserve study obligations, and will impact disclosures in Offering Plans.
Mandatory Increase in Annual Reserve Contributions
(Effective January 4, 2027)
Fannie Mae and Freddie Mac will require condominium associations to budget a minimum of 15% of annual operating expenses toward reserves, up from the longstanding 10% requirement, unless a Reserve Study is done.
Implications for Condo Boards & Offering Plans
- Annual budgets must be revised to reflect the 15% reserve allocation.
- Offering Plans and amendments will be expected to disclose the increased reserve requirement and demonstrate compliance.
- Mid‑year budget‑cycle buildings may need to adjust earlier than usual.
- Higher common charges are expected due to increased reserve funding.
Reserve Studies: Mandatory Use of the Highest Recommended Funding Plan
Associations may rely on a Reserve Study only if they adopt the most conservative (highest) funding recommendation provided by the professional, as an alternative to the 15% reserve requirement.
Implications
- Offering Plans should disclose whether a Reserve Study is used and confirm that the highest recommended funding level is adopted.
- Baseline funding plans are not acceptable.
- Reserve Studies remain valid for 36 months and must include a 30‑year funding plan.
Removal of the 50% Investor Ownership Cap
(Effective Immediately)
The longstanding investor‑ownership limit has been eliminated.
Implications
- Buildings with high investor concentration are now more financeable.
- Offering Plans will likely no longer need to demonstrate compliance with the 50% owner‑occupancy ratio (except for new construction, which still requires 50% presales).
- Sponsors selling remaining units in older buildings benefit significantly.
Reach our Condominium, Cooperative & HOA Practice Group:
Richard Herzbach: rherzbach@certilmanbalin.com, Donna-Marie Korth: dkorth@certilmanbalin.com, & Darren Stakey: dstakey@certilmanbalin.com
