NEW UPDATE ON FANNIE MAE/FREDDIE MAC CONDOMINIUM LENDING STANDARDS: WHAT BOARDS NEED TO KNOW

Written By Carol Lang

On March 18, 2026, Fannie Mae and Freddie Mac announced significant changes for condominium lending in Lender Letter LL-2026-03 and Guide Bulletin 2026-C. There is some good news and some bad news. These updated guidelines are intended to strengthen the financial health and capital planning of condominium communities, with a focus on ensuring long-term structural integrity and sustainability for homeowners. Accordingly, boards and property managers must carefully review these changes as they have a direct and immediate impact on condominium lending, insurance requirements, budgets, and reserves. Fannie Mae/Freddie Mac guidelines apply to all condominium projects, but specific project review standards apply to projects with five or more attached units. *See waiver provisions below.

Key Takeaways for Boards

  • Increase of reserve contribution requirements from 10% to 15% (effective for annual budget starting Jan. 4, 2027);

  • Associations that do not meet the 15% reserve requirement must have completed a reserve study that demonstrates sufficient reserves. If lenders use this option, the lender must verify that the condominium’s budget includes the highest recommended reserve allocation amount in the reserve study to adequately cover the costs identified;

  • Increased the maximum allowable deductible for master insurance policy to $50,000 per unit (beginning July 1, 2026);

  • Actual Cash Value roof coverage is now acceptable, it is no longer required to carry full Replacement Cost Value roof coverage;

  • Fannie Mae/Freddie Mac have eliminated the investor owner limitation of 50%.

Additional New Lender Requirements

  • Lender requirement for unit owners to carry individual insurance (i.e. HO-6 policy) when either:

    • Any portion of the interior of the unit or improvements to a unit are not covered by the master policy, or,

    • The master insurance policy includes a per unit deductible.

  • Retirement of the limited review process for associations; lenders will be required to compete a Full Review, or if applicable a Waiver of Project Review.

    • This is a significant change for the condominium industry. It is estimated that limited reviews represented approximately 40% of all project reviews. Full reviews will entail required condominium questionnaires and more production of documentation from associations to determine lending eligibility for nearly all condominium sales.

  • Expansion of Waiver of Project Review

  • There is now an expansion of eligibility for a Waiver of Project Review for new and established projects with ten or fewer units.

Our Immediate Recommendations for Boards

  • Review budget and reserves to ensure funding is adequate and are in compliance with the new guidelines;

  • Review master insurance policies with your insurance agent to ensure the master policy deductible limits comply with the new guidelines;

  • Conduct a reserve study if one has not been done within the past three years, especially if reserves are not funded at 15% of the budget;

  • Review financial records and documentation to ensure it is accessible and organized;

  • Monitor unit owner delinquency for unpaid common expenses and assessments; and

  • Address any deferred building repairs promptly.

Boards should consider proposing an amendment to the insurance provisions of the documents, requiring Owners to obtain an HO6 policy, if the requirement does not already exist.

If you have any questions or need help with determining your condominium’s lending eligibility based on these new guidelines, please reach out to MEEB or to any one of MEEB’s attorneys directly!

Carol Lang
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