What do the new Fannie Mae and Freddie Mac reserve requirements mean for our condo association?

Fannie Mae and Freddie Mac will not purchase loans in condominium projects they consider ineligible, and their project standards include reserve funding. A project that budgets less than the required share of its assessment income to reserves, or that has deferred maintenance and no credible reserve study, can be found ineligible. When that happens, buyers in the community lose access to conventional financing, which affects resale value for every owner.

Last reviewed August 20, 2026 by Ryan Johnson

A note on sourcing. Fannie Mae and Freddie Mac update their guides on their own schedules and the details move. Everything below is attributed, and this page is re-verified against the current guides on the cadence shown in the update log. Nothing here is legal or lending advice.

Why a lending rule matters more than most statutes

Boards tend to discount this one because nobody can fine them for it. That instinct is exactly backwards.

A statute typically produces a compliance obligation with a defined remedy — Colorado's CCIOA obligations and Florida's structural integrity reserve study law both work that way. This produces something worse: a quiet, transaction-by-transaction tax on every owner's ability to sell. When a condominium project is found ineligible, conventional financing dries up. Buyers who need a mortgage go elsewhere. The pool narrows to cash purchasers and investors, who pay less. Values in the community soften, and no board vote caused it.

The board never receives a notice. The first symptom is a sale falling apart at the closing table.

What the standards actually look at

Project review covers more than reserves, but the reserve-related items are the ones a board can do something about:

Reserve allocation in the budget. The benchmark commonly applied is at least ten percent of annual budgeted assessment income allocated to reserves.
A current reserve study, as the alternative path. Where the flat percentage is not met, a project may still qualify if a current study demonstrates the reserve funding is adequate for the components and their conditions. This is the provision that makes a study valuable rather than merely virtuous.
Deferred maintenance and critical repairs. Known structural or safety deficiencies, or significant deferred maintenance, can render a project ineligible on their own regardless of the reserve balance.
Special assessments. Current or recently levied special assessments are scrutinized, including what prompted them and whether the underlying problem is resolved.

The 2027 timing

The standards tightened following the Surfside collapse in 2021, which redirected attention to deferred structural maintenance in condominium buildings. Provisions have phased in since, with further requirements applying to loans in 2027.

For a board, the practical timeline works backward from that. A reserve study takes weeks to commission and complete. A budget amendment reallocating assessment income takes a board vote and, in some communities, notice to owners. Neither is a thing to start in the month a sale falls through.

The questionnaire is where this becomes real

Project review happens through a lender questionnaire that somebody at the association, usually the manager or the board treasurer, fills out. The answers determine the outcome.

Two failure modes are common. The first is answering honestly and unfavorably when a modest amount of preparation would have produced an accurate and favorable answer, for instance reporting no reserve study when one could have been completed. The second is answering optimistically in a way that does not survive scrutiny, which is worse: it can taint the project and it puts the person who signed it in an uncomfortable position.

The fix for both is having real documentation before the questionnaire arrives.

What boards should do

Determine whether your community is a condominium regime. The legal form governs, not the architecture. Townhome-style buildings are frequently condominiums.
Calculate your current reserve allocation as a percentage of assessment income. It is one division. If it is under ten percent, you are relying on the reserve study path whether you know it or not.
Get a current study if yours is over three years old or if you do not have one. Under these standards a study is not a nice-to-have document; it is the alternative qualification route.
Address known deferred maintenance and document the plan. An identified problem with a funded remediation schedule reviews far better than an identified problem with nothing attached.
Keep the questionnaire package assembled. Current study, current budget, reserve balance, and the status of any special assessment. When a sale is pending, days matter.

Sources

Fannie Mae Selling Guide, project eligibility and project standards provisions
Freddie Mac Seller/Servicer Guide, condominium project eligibility provisions
Fannie Mae and Freddie Mac lender letters on temporary and permanent project eligibility requirements issued following 2021
Community Associations Institute, National Reserve Study Standards

Common questions

Is this a law?

No. Fannie Mae and Freddie Mac are government sponsored enterprises that purchase mortgages on the secondary market. Their guides set the terms on which they will buy. No agency enforces them against your association and no penalty attaches to your board. The consequence is purely market based, and that is precisely why it bites: if the enterprises will not buy loans in your project, most lenders will not originate them, and your buyers are limited to cash or portfolio loans at worse terms.

Does this apply to townhome or single family HOAs?

The project eligibility standards apply principally to condominium and cooperative projects, where the enterprises review the project itself rather than only the borrower and the unit. Planned unit developments with detached single family homes generally face lighter or no project review. If your community is a condominium regime, including a townhome-style building that is legally condominium, assume it applies.

What is the reserve contribution threshold?

The commonly cited benchmark is that at least ten percent of the annual budgeted assessment income should be allocated to reserves. The important detail is the exception: a project can qualify on the strength of a current reserve study demonstrating that its actual reserve position is adequate, even where the flat percentage is not met. A credible study is therefore both a compliance path and a defense.

What counts as a current reserve study?

Lenders and their project reviewers generally look for a study no more than three years old, prepared to a recognized professional standard, covering the components the association is responsible for, and containing an actual funding analysis rather than a component list. A ten year old study, or a spreadsheet a board member assembled, will typically not satisfy a reviewer who is looking for a reason to approve the project.

How would we even find out we have been found ineligible?

Usually through a failed sale. A buyer goes to close, the lender orders project review, the project comes back ineligible, and the deal collapses. Boards frequently learn about it from an angry seller rather than from any notice. Because the review happens per transaction, the same project can pass and fail depending on which lender is looking and what the questionnaire discloses.

Update log

Aug 20, 2026 Page published. Under legal review.