Fannie Mae raises the condo reserve bar to 15% on January 4, 2027: what it means for selling or refinancing

Most mortgages in America are bought by Fannie Mae or Freddie Mac. When a buyer wants a conventional loan on a condo, the lender checks the whole building — its budget, its reserves, its insurance and its repairs — not just the unit. If the building doesn’t meet the rules, the building is called “non-warrantable,” and buyers usually need a different, often more expensive, kind of loan. In March 2026 Fannie Mae announced changes in Lender Letter LL-2026-03 that tighten those building rules.

The change on January 4, 2027

Today a condo project generally needs to budget at least 10% of its assessment income for replacement reserves. For loan applications dated on or after January 4, 2027, that rises to 15%. The date that matters is when the buyer or refinancing owner applies for the loan, not when it closes. A project can meet the rule another way: by funding reserves at the highest level its reserve study recommends.

Here is the math in plain numbers. Say your association budgets $1,000,000 a year in owner assessments. Under the old 10% bar, $100,000 of that had to go to reserves. Under the new 15% bar, it is $150,000. In a 100-unit building that is $50,000 more a year, or about $42 more per unit per month, if the board gets there by raising assessments alone. Some buildings already clear 15% because their SIRS requires heavy reserves; others will not.

Changes already in force

The same letter retired Fannie Mae’s “limited review,” a lighter check many lenders used for established buildings. For projects of more than 10 units, lenders now need a fuller review of the building’s documents. Fannie Mae also tightened what it accepts as a reserve study, and industry summaries report that a “baseline” funding plan — the minimum plan that keeps each reserve account just above zero — no longer counts toward its reserve-study option.

Who feels it

• Owners who want to sell: fewer buyers can use conventional financing in a non-warrantable building.
• Owners who want to refinance: the same building review applies.
• Boards: the reserve line in the 2027 budget now affects every owner’s ability to sell or borrow, not just the building’s repairs.

What to do now

• Board members: divide the 2027 reserve line by total budgeted assessment income. If it is under 15%, ask your manager and reserve professional what it would take to reach 15% or the highest recommended level in your study.
• Owners planning to sell in 2027: ask the manager whether the building is expected to meet the new bar, and talk to a lender early.
• Everyone: ask for the questionnaire answers your manager gives lenders — that is what buyers’ lenders see.