Important: Fannie Mae Condo Guideline Updates

[Doug Smith]

Investors might not worry that much about Conventional Financing, but they do need to worry a out resale...and the ability to finance property is important to value. I passed this along to our loan officers, realtor partners, and others involved in real estate this morning. I thought it made sense to share it on this forum as well. Some of this is "Florida-specific", but much of it is relevant nationwide regarding condos. 

Fannie Mae issued a major update to its condominium guidelines on March 18, 2026 (Lender Letter LL‑2026‑03). These changes affect how condos are reviewed, insured, and approved for conventional financing, and they will directly impact many Florida condo transactions over the next 6 to 18 months. Below is a breakdown of the changes and what they mean for you and your buyers.

• Limited Review is being eliminated
Fannie Mae is officially retiring the Limited Review process for established condo projects.
This applies to loan applications dated on or after August 3, 2026.
Going forward, condo loans will require either a Full Project Review or a Waiver of Project Review.
Practically speaking, this means more documentation from the association, formal questionnaires, and longer lead times on condo deals. Limited Review historically covered a large percentage of condo transactions, so this is a meaningful operational shift.

• Reserve funding requirements are increasing
The minimum reserve contribution requirement is increasing from 10 percent to 15 percent of the association’s annual budget.
This becomes effective for budgets in place as of January 4, 2027.
If a reserve study is used, the association’s budget must reflect the highest recommended funding level in that study. Baseline and threshold funding methods are no longer allowed.
This change may lead to higher HOA dues or special assessments in some buildings, which can impact buyer qualification and resale demand.

• Roof insurance rules have been relaxed
Fannie Mae now allows Actual Cash Value (ACV) coverage on roofs for condos and single‑family homes.
Replacement Cost Value (RCV) is still required for the rest of the structure. Here is the issue as I see it: lenders are, as you know, prohibited by Florida law from even asking for the RCE. Florida has a very powerful insurance lobby, so we lenders have to fight Fannie/Freddie on this guideline often.

This reverses a 2024 rule that made many Florida condo buildings uninsurable or prohibitively expensive to insure.
This change will help some previously “non‑warrantable” buildings regain eligibility.• Master policy deductible cap added
The maximum allowable per‑unit deductible on a condo master insurance policy is now capped at $50,000.
If the master policy carries a per‑unit deductible, unit owners may be required to carry an HO‑6 policy.
This change provides clarity and prevents extreme deductible structures that were killing financing in Florida coastal properties.

• Waiver of Project Review expanded for small condos
Fannie Mae has expanded eligibility for a Waiver of Project Review to include new and established condo projects with ten or fewer units.
Previously, this was limited to projects with four or fewer units.
This is a meaningful positive change for small condo buildings and boutique developments common throughout Florida.

• Investor concentration limits removed
The prior 50 percent investor‑ownership cap for established projects under Full Review has been eliminated.
This helps investor‑heavy buildings that were previously blocked from conventional financing.

• Florida‑specific condo penalties are being retired
Fannie Mae has eliminated the special Florida Project Eligibility Review Service (PERS) requirements for attached condo projects.
Florida condos will now be reviewed using the same delegated Full Review process used nationwide.

This removes a long‑standing disadvantage that caused many Florida deals to fall apart late in the process.
What this means for your transactions

Condo deals will increasingly require early review of HOA budgets, reserves, insurance, and questionnaires.

Buildings with weak reserves or incomplete documentation may face delays or financing challenges.

Some previously non‑warrantable Florida condos may now qualify again due to insurance flexibility and expanded waivers.