Correct one number before you act on it

Several trade write-ups say the 2026 rules raise reserves to 15%. They do not. Under Full Review, the budget must fund replacement reserves at at least 10% of the budget — annual budgeted reserve allocation divided by annual budgeted assessment income. 15% is the delinquency ceiling: no more than 15% of units 60+ days past due on common expense assessments, and, separately, no more than 15% 60+ days past due on each special assessment.

A reserve study may substitute for the 10% calculation only if it shows funded reserves equivalent to the standard and the budget meets or exceeds the study’s recommendations — and baseline funding may not be used to waive the 10%. Studies must be no more than three years old and prepared by an independent third party.

What the loss of Limited Review actually does to a Hawaii building

For an attached unit in an established condo project, the review methods are now only Full Review with Condo Project Manager, FHA project approval, or streamlined PERS. Limited Review is gone — the Selling Guide page for it returns a 404.

That means on essentially every resale in a project over ten units, a lender pulls the association’s budget, reserve funding, insurance evidence, delinquency rates, litigation, special assessments and inspection reports. Lender questionnaires get longer and arrive more often, and the manager who fills them in becomes a bottleneck.

The Hawaii arithmetic

Two failure modes are specific to this market:

The hurricane gap fails the 100% test. The Insurance Division’s own account is that admitted carriers in Hawaii “often cover just 20-30% or less of a building’s hurricane exposure.” A building carrying $10M of hurricane cover on $100M of value does not meet a 100%-of-replacement-cost requirement, whatever else is in place. That is precisely the gap the reactivated Hurricane Relief Fund exists to close.

The per-unit deductible structure fails outright. The 5%-per-occurrence test and the $50,000-per-unit test are separate. A surplus-lines placement structured with a per-unit windstorm deductible above $50,000 is non-compliant as of July 1, 2026 regardless of how the percentage math comes out.

The board's checklist for the next renewal

• Read the deductible structure, not just the number. Per occurrence or per unit? Separate deductibles per peril? Each peril must independently comply.
• Confirm named-storm windstorm is a covered peril and not excluded or sublimited.
• Check ordinance-or-law limits against the age of the building — and document market unavailability if you cannot get them.
• Ask the broker in writing whether a deductible buy-back is available, since the guide expressly allows one to satisfy the cap.
• Run the two 10%/15% tests against your own budget and ageing report before a lender does.
• Tell owners that an HO-6 is now effectively mandatory where a per-unit deductible exists.

A note on sourcing

The substantive rules above are quoted from the live Fannie Mae Selling Guide. The lender-letter and bulletin numbers and the specific effective dates are reported — Fannie Mae and Freddie Mac refuse automated retrieval of the letters themselves — so a board relying on a date for a renewal decision should confirm it with its lender or broker.

What to watch

The January 1, 2027 servicer provisions, and whether Hawaii legislates any response. A 2026 bill that would have written compliance with “mortgage lending requirements” into the statutory duties of associations, boards and managing agents was heard, amended, and then deferred to death in Senate Judiciary.