Fannie Mae and Freddie Mac have announced important changes to condominium project review standards that condo boards and community associations should be watching closely assuming they want their purchasers and home owners to be able to obtain agency-backed financing.
Most notably, effective January 4, 2027, the minimum reserve allocation for capital expenditures and deferred maintenance will increase from 10% to 15% of annual budgeted income assessment for loans undergoing the Full Review process.
Other key points:
- Enhanced reserve study requirements, including that when a reserve study is used, the project budget must include the highest recommended reserve allocation amount in that study. This is another reason why it is important to speak to your attorneys and accountants before performing any formal reserve study.
- Elimination of Limited Review (Fannie Mae) Fannie Mae is retiring the Limited Review process for many established condominium projects, meaning more projects will be subject to Full Review.
- Insurance Requirements Tightened
Updated insurance standards, including caps on per-unit deductibles and additional coverage requirements, may require associations to revisit their current policies.
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