Fannie Mae has announced major changes to its condo guidelines that are set to impact the U.S. housing market. These updates are important for both current and future homeowners.
Key Changes to Condo Reviews
Effective immediately, the Investor Concentration Limit has been retired; there was a 50% concentration limit for investment properties in established projects, which has now been removed, allowing for more flexibility in future investor unit ratios. Additionally, the eligibility for a Waiver of Project Review now includes new, established properties with ten or fewer units, up from the previous limit of four or fewer.
Effective July 1, 2026: Actual Cash Value (ACV) insurance coverage on roofs will be allowed, instead of requiring full Replacement Cost Value (RCV). Additionally, a deductible cap has been added, setting the maximum allowable per-unit deductible for a master property insurance policy at $50,000.
Effective August 3, 2026: Fannie Mae will retire the limited review process, which means lenders will be required to conduct full reviews for every condo transaction. This means additional underwriting of the HOA’s financial health.
Effective January 4, 2027: The minimum reserve funding requirement will increase from 10% to 15% of the annual budget. HOAs must adhere to the highest recommended funding level from reserve studies, and baseline/threshold funding methods are no longer permitted.
While some rules are changing, new construction condos maintain specific requirements. Since they are still considered high risk, a full review remains required, and they are not eligible for the new waiver expansion. The 50% Presale Requirement also remains in effect, meaning at least 50% of the total units in the project must be sold before buyers can receive conventional financing.
The updates present a mixed bag of benefits and potential challenges:s
Pros
- Actual Cash Value (ACV) roof coverage may allow condo buildings that were previously ineligible for conventional financing to now qualify.
- The $50,000 cap on the per-unit master policy deductible provides a clear, consistent standard for lenders, which removes inconsistent decisions across markets.
- HOAs with up to 10 units can avoid the full project review process, reducing friction for their buyers.
Cons
- The end of the Limited Review means more time and scrutiny for underwriting.
- Higher reserve requirements will cause more Homeowners Associations (HOAs) to become ineligible.
- The changes could lead to fewer affordable options for first-time homebuyers.
- These updates could create more instability in the housing market and potentially weaken Fannie Mae’s own collateral position.
- The quick transition timeline limits the time potentially ineligible HOAs have to rectify their situations.
While these changes do not mean you will be unable to purchase or refinance a condo, you should be prepared in your condo/townhome home-buying journey accordingly. If you have any questions, give us a call at (760) 930-0569 to discuss your mortgage needs.
