The Fannie Mae update introduces major changes that affect how condominium associations (COAs) manage finances, insurance, and unit sales. Announced in March 2026, these updates change lending standards and place greater importance on long-term financial health. While they are not legal requirements, they have a direct impact on buyers and their ability to secure financing.
Understanding the Freddie Mac and Fannie Mae Update
Buyers may have heard of Fannie Mae and Freddie Mac, but many don’t know their exact purposes. Fannie Mae and Freddie Mac operate in the secondary mortgage market. This means that they purchase loans from lenders, allowing banks to issue more mortgages.
Because they take on financial risk, they require lenders to follow specific standards. These standards determine whether a condominium loan can be sold to them. If a community does not meet those standards, buyers may have fewer financing options. This can affect demand and resale value.
On March 18, Fannie Mae and Freddie Mac issued updates that impact condo associations. Board members must familiarize themselves with these changes to maximize property values and remain attractive to buyers. While compliance is not mandatory, it helps condominiums stay ahead of the market and keeps existing unit owners satisfied.
Changes to the Review Process for Condo Projects
One of the most significant changes in the Fannie Mae update to condo associations is the removal of the limited-review option. In the past, many condo transactions qualified for this simplified review. Moving forward, most will require a full review.
This shift means lenders will ask for more detailed information about the association. On their part, boards should expect more lender questionnaires, more financial and operational disclosures, and increased administrative burden.
That said, there is also broader eligibility for review waivers, especially for smaller communities. Even so, most associations will experience a more thorough review process. As a result, boards must keep records organized and ready for submission.
Stronger Reserve Funding Standards
Financial planning is now under closer scrutiny under the Fannie Mae update, specifically regarding reserve planning. In Virginia, condo associations are required to conduct reserve studies at least once every five years (Section 55.1-1965).
Key changes include:
- A required minimum of 15% of the annual budget allocated to reserves by 2027
- A requirement to follow the highest recommended funding level in a reserve study
- Elimination of baseline funding as an acceptable method
These changes may require boards to adjust their budgets. Some associations may need to increase dues, reduce expenses for specific line items, or cut costs. Thanks to the growing role of reserve studies, boards must ensure that their studies remain current and realistic.
Insurance Requirements and Adjustments
Insurance standards have also been updated to reflect current market conditions. Rising premiums and limited availability have made older requirements harder to meet.
The Fannie Mae and Freddie Mac update on condo associations introduces several changes, such as:
- More flexibility in how replacement cost coverage is evaluated
- Removal of inflation guard requirements
- No strict requirement to insure roofs at full replacement cost
- A maximum deductible of $50,000 per unit starting in 2026
At the same time, lenders now expect unit owners to carry individual insurance policies. These policies help cover gaps between the master policy and personal responsibility.
For boards, it is important to review their association’s insurance coverage and work with qualified professionals. Communities with higher deductibles may need to make adjustments, too.
Increased Monitoring and Communication
The update also affects how loans are monitored over time. Loan servicers will take a more active role in ensuring compliance. New tasks include verifying insurance coverage annually, monitoring reductions in coverage, and regularly reminding borrowers to maintain insurance policies.
Given the increased requirements, associations should expect more communication from loan servicers. Boards must also do their part to ensure they have adequate coverage in place.
Timeline and Phased Implementation
The Fannie Mae update will not take effect all at once. Instead, it rolls out in stages.
Some changes are already in place. Others will take effect in mid-2026 or early 2027. For example, the deductible cap will begin in July 2026. The higher reserve funding requirement will apply in January 2027.
This phased approach gives boards time to prepare. Still, it is important to plan early and make adjustments as soon as possible. Waiting too long can cause the board to rush its decisions when changes are due. This, in turn, can strain the association’s finances.
Advice for Condo Association Boards
The Fannie Mae update requires the board to plan proactively and in advance. Boards that act early are sure to encounter fewer challenges later on.
Here are some practical steps to consider:
- Check whether the association meets current eligibility standards to avoid surprises in the future
- Review reserve studies and funding levels to ensure they meet the new requirements by the deadline
- Adjust the annual budget to meet the 15% threshold if necessary
- Evaluate insurance policies and deductibles to comply with the update on time
- Prepare the additional documents that lenders may request in line with the new update
- Work with professionals such as reserve specialists, lawyers, and insurance advisors
Of course, board members are not always equipped with the knowledge, tools, and resources to comply with these new standards. After all, they are only volunteers. To help protect the association, boards should seek help from an HOA management company.
In the End
The Fannie Mae update brings changes to reserve funding, insurance, and project reviews. These updates directly affect how condos operate and how easily buyers can secure financing. While not legally required, meeting these standards can help the association maintain property values and marketability. Boards should plan ahead and stay organized to navigate these changes properly.
National Realty Partners is a leading provider of HOA management services in Virginia. We can help your board manage and enforce the rules. Call us today at 703-435-3800 or request a proposal online!
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