Fannie Mae & Freddie Mac Changes – What Community Associations Need to Know
Fannie Mae and Freddie Mac quietly announced several important policy changes in March 2026 that will directly impact communities across the country. While these updates are not laws – meaning, there is no legal requirement to comply with them – practically speaking, failing to do so can significantly impact the ability of homeowners in the community to obtain conventional mortgage financing, which could result in a decrease in market value.
Key Changes You Should Know About
Fannie Mae and Freddie Mac set the eligibility rules for most conventional mortgage loans. Lenders rely on those rules when approving loans for buyers or refinances in condominiums and HOA communities. If a community does not meet these standards, lenders may refuse to write conventional mortgages in the project. Here are recent changes regarding reserve funding requirements you should know about:
- Potentially Higher Reserve Funding Requirement (15% Instead of 10%)
Starting January 4, 2027, condominium and HOA projects reviewed under Fannie Mae’s “Full Review” process must generally allocate at least 15% (up from 10%) of their annual assessment income to replacement reserves. Failing to meet the 15% threshold could make a project ineligible for conventional financing, unless your community alternatively meets the certain reserve study standards.In other words, if your association does not meet the 15% benchmark, it may still qualify if its budget matches the highest recommended reserve funding level identified in its reserve study.
- Alternate Reserve Study Approach to Approval
Effective August 3, 2026, associations that do not meet the now 10% and soon to be 15% threshold, may rely on reserve studies to demonstrate adequate reserves, provided they are budgeting at the highest recommended level in the study. It should be noted, if using this method, baseline funding models are not acceptable.
New Jersey Communities Only: Note that this does not change the reserves obligation under New Jersey law other than to be able, in some instances, reduce the association’s reserve contribution to less than the 15% benchmark if the association can do so under the highest recommended level in the study. The alternative to go below 15% also appears to remove the option to reserve at 85% of the lowest level in the study available under New Jersey law.
What Does This Mean?
Some lenders may incorrectly assume that associations must meet both the 15% threshold and the reserve study approach to approval – even though the new guidelines do not actually require communities to meet both. Given this potential, boards should be prepared to involve their accountant, management, legal counsel, and reserve study specialist if a dispute arises over these issues.
You should discuss these important changes and the impact that they may have on your community with your legal counsel. There are also Fannie Mae and Freddie Mac revisions to the insurance requirements that we recommend you discuss with your insurance agent or broker.
