Fannie Mae banned the reserve-funding method Florida's SIRS statute requires
Fannie Mae banned the reserve-funding method Florida's SIRS statute requires
2026-09-10 · Florida · Compliance
What happened. A Florida condominium association can now fund its reserves exactly as the Florida Statutes require and, in the same act, fail the test that decides whether buyers in its building can get a conventional mortgage. The two rules are not ambiguous and they are not reconcilable by careful drafting. They point in opposite directions.
The mortgage side changed for loan applications dated on or after 3 August 2026.
What the mortgage rule now says
Fannie Mae's Selling Guide, in the Full Review section governing established condominium projects, provides:
“The budget must include the highest recommended reserve allocation amount in the reserve study to adequately cover the costs identified. Although reserve studies may establish a reserve funding goal that allows that reserve cash balance to approach, but never fall below, zero during the cash flow projection (often referred to as the baseline funding method), this method may not be used to waive the 10% reserve requirement.”
The same section adds a deference clause that turns out to matter: “Individual states may have various statutes concerning the use and content of reserve studies. Fannie Mae requires that a reserve study used by the lender in its analysis meet or exceed requirements set forth in relevant state statutes.”1
What the Florida statute requires
Section 718.112(2)(g)4.a, Fla. Stat., sets the minimum content of a structural integrity reserve study:
“At a minimum, the structural integrity reserve study must include a recommendation for a reserve funding schedule based on a baseline funding plan that provides a reserve funding goal in which the reserve funding for each budget year is sufficient to maintain the reserve cash balance above zero.”2
Read the two together. Florida requires the study to recommend a baseline plan. Fannie Mae says the baseline method cannot be used to satisfy the reserve-study exception to its flat percentage test. An association that funds precisely to its statutory SIRS baseline is compliant with Florida law and outside the mortgage exception at the same time — which drops it back to the flat percentage requirement it was trying to meet.
This is a floor-versus-ceiling problem, not a contradiction in terms
To be fair to both drafters: the statute sets a minimum the study must contain, and nothing in Florida law stops a study from also recommending a fuller funding plan or an association from funding above the baseline. The collision is practical rather than strictly legal. But it lands on real boards, because the baseline plan is what Florida boards have been told to adopt, and it is what many studies delivered.
The other changes in the same package
The reserve-method rule did not arrive alone. Announced in March 2026 and coordinated with Freddie Mac at the direction of the Federal Housing Finance Agency, the package also carries:
- A rise from 10 percent to 15 percent in the minimum replacement-reserve allocation, measured against total annual budgeted assessment income, for loan applications dated on or after 4 January 2027. The Selling Guide still reads 10 percent today.
- Retirement of the Limited Review process for established projects, effective 3 August 2026. Limited Review has been reported as roughly 40 percent of all project reviews.
- A maximum per-unit master-policy deductible of $50,000, effective 1 July 2026.
- Expanded waiver of project review for projects of ten or fewer units, elimination of the 50 percent investor-concentration cap, and retirement of Florida-specific review requirements for new attached condominiums.
The half of this that is genuinely good news for Florida
Retiring Limited Review is not a tightening for Florida — it is the removal of a penalty the state has carried since 2008. Rep. Byron Donalds' official House release of 19 March 2026 states that FHFA eliminated the Limited Review process that had for seventeen years subjected Florida condominium borrowers to a 25 percent down payment, bringing Florida to the 3 to 5 percent national standard. Donalds: “These 2008 policies are not only outdated and unfair to the Sunshine State, but they are an unnecessary barrier to condo financing and have limited the available housing options for Floridians.”3
So the same package that creates the reserve conflict also removes a long-standing Florida-specific disadvantage. Coverage that reports only one half gets the direction of travel wrong.
The decision a Florida board faces for its FY2027 budget
Boards adopting budgets this autumn have a genuine choice to make, and it is a choice between two costs rather than between compliance and non-compliance.
Fund to the statutory baseline. Preserves cash, satisfies s. 718.112(2)(g), and sits outside the reserve-study exception in a Full Review. The cost is borne by every owner trying to sell, in the form of a narrower buyer pool.
Fund to the study's highest recommended allocation. Satisfies both, and costs the money now. For an association already absorbing a milestone-driven repair programme, that may not be available.
Two practical notes. First, expect lenders to start asking for the full reserve study rather than its summary page — the rule turns on what the study recommends, not on what the budget asserts. Second, if the association has used one of the statutory relief mechanisms — the two-budget milestone pause under s. 718.112(2)(f)2.e, or a loan or line of credit under 2.c — understand that a paused or reduced reserve line is exactly what a Full Review now scrutinises.
A number not to print
Coverage of this subject frequently cites a count of Florida condominium projects on Fannie Mae's ineligibility list — commonly 1,438 Florida associations out of 5,175 nationwide. That figure dates to 11 March 2025, and more importantly the list is not public. Fannie Mae does not publish it; every circulating count is a third-party estimate. We found no verifiable 2026 figure and are not printing one.
A related correction is worth making at the same time: a project on that list is not “unsellable.” Ineligibility for conventional financing does not block FHA or VA loans, portfolio loans held by the originating bank, or cash buyers. It narrows the buyer pool and prices the financing constraint into the sale — which shows up as a discount, not a closed market.
Sourcing note
The substance above is taken from Fannie Mae's live Selling Guide, which we opened directly, and from Florida's statute. The underlying lender letter and Freddie Mac's companion bulletin are behind access controls that defeated repeated attempts to fetch them, so we have deliberately not printed a lender-letter number — secondary sources disagree about its exact form. Where a figure below the Selling Guide level is cited here, it comes from published legal analysis and is identified as such.
What to watch next
4 January 2027 is the date to diarise: the reserve allocation requirement rises to 15 percent for applications from that day. A budget adopted this autumn is the budget a January buyer's lender will examine.
Watch also for DBPR's reserve rule. Rule 61B-22.005, F.A.C. — the rule that would implement s. 718.112(2)(f) and set requirements for alternative funding methods — is still in rulemaking, with a Notice of Change published on 31 July 2026. The rule currently in force carries an effective date of 23 December 2002, which is to say it predates SIRS entirely. Whatever it says about funding plans will land on top of the conflict described here.
Related Florida HOA Topics
- Fannie Mae Selling Guide, B4-2.2-02 Full Review Process — reserve study and budget requirements ↩
- s. 718.112(2)(g), Fla. Stat. (2026) — structural integrity reserve study contents and baseline funding plan ↩
- Rep. Byron Donalds, press release on FHFA elimination of Limited Review, 19 March 2026 ↩
- Bilzin Sumberg, Emerging Pressure Points on Florida's Condominiums and Homeowners' Associations, May 2026 ↩
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