Condo Owners and Investors - Upcoming Financing Changes

[Stephanie Medellin]

Fannie Mae has put out a new bulletin related to condo project financing. These changes affect both prospective investors and buyers, as well as current owners who want to maintain their property value and make sure their HOA is being run efficiently.

https://singlefamily.fanniemae.com/media/44986/display

What are the changes?
These changes generally aim to simplify the approval process while promoting the financial stability of condo projects.

Change	Detail	Effective Date
Retirement of Limited Review	The Limited Review process is being eliminated. Projects previously eligible must now use the Full Review or Waiver of Project Review processes.	Mandatory for all loan applications dated on or after August 3, 2026.
Increased Replacement Reserve	The minimum requirement for replacement reserve allocation is increased from 10% to a minimum of 15% of the annual budgeted income assessment (for Full Review).	Mandatory for all loan applications dated on or after January 4, 2027.
Expansion of Waiver of Project Review	Eligibility is expanded to include new and established projects with ten or fewer units.	Effective immediately.
Retirement of Investor Concentration Limits	The 50% limit for investment property concentration in established projects (Full Review option) is retired for investor loans.	Effective immediately.
Retirement of Florida PERS Review	The requirement for new attached unit condo projects in Florida to be submitted to Fannie Mae's Project Eligibility Review Service (PERS) is retired; they can now use the lender-delegated Full Review process.	Effective immediately.
Enhanced Reserve Study Requirements	When using a reserve study to demonstrate sufficient reserves, lenders must verify the budget includes the highest recommended reserve allocation from the study. The baseline funding method is no longer permitted.	Encouraged immediately, mandatory for all loan applications dated on or after August 3, 2026.

Property Insurance Updates

These changes provide more flexibility in coverage documentation and address requirements for master and unit-owner policies.

Change	Detail	Effective Date
Master Policy Coverage Sufficiency	The requirement to insure roofs on a replacement cost basis is retired; roofs must be insured but not necessarily at replacement cost. Master policy coverage must equal at least 100% of the estimated replacement cost value of the project improvements.	Effective immediately.
Master Policy Deductible	The maximum allowable per unit deductible is $50,000.	Mandatory for all loans with application dates on or after July 1, 2026.
Unit Owner's Policy (HO-6) Requirement	A borrower must obtain a unit owner's policy when the unit's interior/improvements are not covered by the master policy OR when the master policy includes a per unit deductible.	Mandatory for all loans with application dates on or after July 1, 2026.
Unit Owner's Policy (HO-6) Deductible	The maximum allowable deductible for a unit owner's policy is the greater of 5% of the property insurance coverage amount or $2,500.	Effective immediately.

Who does this affect?

Prospective buyers and future condo sellers.

What you can do:

If you're currently an owner, make sure your HOA is buying insurance policies to meet financing guidelines, and budgeting to enable the highest number of buyers to obtain financing for any condo sales in your association. When buyers get turned down for conventional financing for reasons related to the HOA, it can potentially lower property values for all the owners in the association. As buyers have to turn to more expensive financing options (either higher rates or higher down payments), they may end up offering less as a result and/or the units will sit on the market longer, leading to lower sales prices. For condo owners considering a refinance, these changes may also affect your ability to obtain a refinance.