[NEWS] Does Your Condo Budget Meet the New 15% Reserve Rule?

For loan applications dated on or after January 4, 2027, Fannie Mae and Freddie Mac both require a condominium project's budget to allocate at least 15% of assessment income to reserves, up from 10%. Two related changes have applied since August 3, 2026.

The requirement sits inside the project review a lender runs before financing a unit. Fannie Mae's Selling Guide applies its Full Review to condo projects, co-op projects and certain manufactured home projects, and its FAQ says evaluation of PUD projects is in most cases delegated to the lender.

Fannie Mae's Project Standards FAQ gives the calculation: divide the annual budgeted replacement reserve allocation by the association's annual budgeted assessment income. It is measured from the budget, not from the balance in the reserve account, and both companies' FAQs say a special assessment cannot stand in for the budgeted allocation.

Since August 3, Fannie Mae's Lender Letter LL-2026-03 has required lenders to verify that the budget "includes the highest recommended reserve allocation amount in the reserve study," and says lenders "are no longer permitted to use the baseline funding method" — the approach that lets a reserve balance fall close to zero without going below it. Freddie Mac's condominium FAQ describes the same change on the same date. The shorter reviews that skipped these questions, Limited Review at Fannie Mae and Streamlined Review at Freddie Mac, closed to new applications then as well.