2026-09-12 · Maryland · Compliance

What happened. Fannie Mae and Freddie Mac rewrote their condominium project standards in Lender Letter LL-2026-03, issued 18 March 2026, and one of the changes creates a mismatch with Maryland law that boards have not had to think about before.

From 4 January 2027, the agencies' reserve requirement for a Full Review rises from a minimum of 10 percent to 15 percent of annual budgeted assessment income — unless the association has a reserve study completed or updated within the last three years and is funding at the highest recommended level.¹

Maryland requires an updated reserve study at least every five years.² An association on a strictly five-year cycle is in full compliance with state law and, for two years out of every five, outside the exception that avoids the 15 percent budget line.

The sourcing caveat, stated up front

Fannie Mae's servers refuse automated retrieval of the lender letter itself. We could not read the primary document. The $50,000 per-unit master-policy deductible cap is verified from Fannie Mae's own Selling Guide B7-3-03, which states that “the maximum allowable per unit deductible for all required property insurance perils covered by a master property insurance policy is $50,000 per unit,” as is the expanded waiver of project review for projects of ten or fewer units.³

The 10-to-15 percent reserve change, the 4 January 2027 date and the elimination of Limited Review are reported consistently by three independent readings — CAI's advocacy arm, a Maryland law firm's client alert, and a working Ocean City broker — but not read at source here.¹⁴⁵ Anyone acting on the percentages should pull the letter directly.

1. Dawn Bauman, CAI Advocacy, 18 March 2026 — Fannie Mae Lender Letter LL-2026-03 and the Freddie Mac bulletin: the 10-to-15 percent reserve change effective 4 January 2027, the three-year reserve study exception at the highest recommended funding level, and Limited Review elimination on 3 August 2026 ↩
2. Maryland Code, Real Property § 11-109.4 — the reserve study requirement and the at-least-every-five-years update cycle, with the staggered initial deadlines established by Chapter 664 of 2022 ↩
3. Fannie Mae Selling Guide B7-3-03, Master Property Insurance Requirements for Project Developments — the $50,000 per-unit maximum allowable deductible, as published ↩
4. Claudia Lopez-Knapp, Whiteford Taylor Preston, 4 May 2026 — client alert on the Fannie Mae project standards and property insurance changes, noting the standards contain no Maryland-specific provisions ↩
5. Lauren Bunting, OC Today-Dispatch, 13 August 2026 — the practical effect on the Ocean City market, including the disqualification of the baseline funding method and the requirement to fund at the highest recommended amount ↩
6. Maryland REALTORS, Housing Statistics July 2026 (data from Bright MLS, current as of 6 August 2026) — Worcester County median days on market 51 versus 39, 4.7 months of inventory, against statewide 14 days and 3.0 months; all property types, not condominium-only ↩
7. Melissa Esham, Deeley Insurance Group, 26 December 2025 — Eastern Shore broker's account of current Maryland association master-policy deductible levels and the deductible history from $5,000 to $10,000 in 2020 ↩