The new Fannie Mae and Freddie Mac rules change how condo associations qualify for conventional mortgage financing, and the consequences reach the whole community, not just one owner. If your association fails even one eligibility test, the building can be labeled non-warrantable, which means buyers cannot get a standard conventional loan on any unit in it. For most boards, the practical question is simple. Are we on the right side of these rules, and if not, what do we fix first? Here is what changed, why a single failed criterion affects everyone, and where to start.
What actually changed
In March, Fannie Mae and Freddie Mac issued coordinated updates to how condo projects qualify for conventional financing. Some of the changes make life easier. The old rule that froze financing once investors owned more than half the units is gone, which helps a lot of high-density buildings. Other changes raise the bar, and those are the ones boards need to watch.
The headline changes:
- Higher reserve funding. The minimum annual reserve contribution amount is moving from 10 percent to 15 percent of the annual budget, for loan applications dated on or after January 4, 2027.
- A new insurance deductible cap. Master property policies now face a deductible ceiling, currently set at $50,000 per unit, that took effect July 1.
- The end of the shortcut reviews. Fannie Mae is retiring its Limited Review path, and Freddie Mac is ending its comparable Streamlined Review on August 3. More condo purchases will get a full project-level review instead of the lighter one.
Put together, these mean lenders will take a closer look at your association, and they will expect stronger reserves and cleaner insurance than many communities carry today.
Why one failed test affects every unit
This is the part that catches boards off guard. Warrantability is judged at the project level, not the unit level. If your association misses a single criterion, the whole building can be treated as non-warrantable, and that label follows every unit, not just the one under contract.
The criteria that can disqualify a project include reserves, delinquency rates, insurance, presale thresholds, single-entity ownership limits, and limits on commercial space. Fail any one and buyers across the community can lose access to conventional loans at the same time.
The fallout is real. In a survey of more than 700 board members, managers, and industry partners by the Community Associations Institute research foundation, nearly two-thirds of communities that had already been ruled ineligible said it had hurt home sales or property values. When a building goes non-warrantable, the buyer pool shrinks to cash and specialty lenders, offers soften, and owners who need to sell feel it first.
The criteria most likely to trip up a board
Reserves. This is where the new bar bites hardest. A current, well-funded reserve study is the clearest signal to a lender that your community plans ahead. If your budget is contributing less than the new standard (15%), or your last reserve study is outdated, that gap will surface in a full review.
Insurance. The new deductible cap means a policy your board renewed on price alone could now put the whole association offside. Read your master policy against the current requirement before renewal, not after a buyer is denied.
Delinquencies. Too many owners behind on assessments can tip a project out of eligibility. Steady collections are not just a cash-flow issue anymore. They are part of what keeps your community financeable.
Management. Lenders and industry veterans point to management quality as the deciding factor in whether a community stays compliant. The associations that fall out of warrantability are often the ones without someone watching these boxes year-round.
What your board can do now
- Pull your most recent reserve study and compare your budgeted contribution against the new funding standard.
- Read your master insurance declarations page and check the per-unit deductible against the current cap.
- Look at your delinquency rate. If the balance is trending upward, it’s time to tighten the reins on collections.
- Ask whether your project-level documents are ready for a full lender review, since the shortcut reviews are going away.
- If a state first-time-buyer bond program matters to your buyers, know that many still carry their own owner-occupancy requirements that sit on top of the federal rules and vary by state.
At Strauss & Associates, we have been working with community and condo associations since 1986, and this is exactly the kind of review a board should not put off. Catching a gap now is a fixable problem. Catching it when a sale is already on the table is not.
FAQ
Q: What is a non-warrantable condo?
A non-warrantable condo is a project that does not meet Fannie Mae or Freddie Mac eligibility rules, so its units cannot be financed with a standard conventional loan. Because the judgment is made at the project level, the label applies to the whole building, not a single unit.
Q: When do the new reserve funding requirements take effect?
The higher reserve funding standard applies to loan applications dated on or after January 4, 2027. That gives boards a window now to review their reserve study and adjust the budget before it matters to a buyer.
Q: Does the new deductible cap apply to our master insurance policy?
If your association carries a master property policy, yes, the new per-unit deductible ceiling can affect your warrantability. Check your current deductible against the cap, which is currently $50,000 per unit, before your next renewal.
Q: How can our board find out if our association is warrantable?
Start with your reserves, your master insurance policy, and your delinquency rate, since those are the criteria most communities miss. A CPA who works in community associations can review these against the current standards and tell you where you stand.
Q: Can better property management keep our association compliant?
It helps a great deal. Communities that stay warrantable usually have someone tracking reserves, insurance, and collections all year, rather than scrambling when a lender asks. Management quality is often what separates a compliant project from one that falls out.
If you are not sure whether your association meets the current Fannie Mae and Freddie Mac standards, it’s time to have that conversation now – not before a sale falls through. Here at Strauss, we can review your reserves, your master insurance policy, and your delinquency picture against the criteria that decide warrantability, and help your board close any gaps while there is still time. Reach out and we will walk through where your community stands.