2026-09-12 · Michigan · Regulation

What happened. Fannie Mae and Freddie Mac issued coordinated changes to condominium project standards on 18 March 2026, in consultation with the Federal Housing Finance Agency. The headline number: the reserve allocation for capital expenditures and deferred maintenance rises from a minimum of 10% to a minimum of 15% of the annual budgeted assessment income, for mortgages with application received dates on or after 4 January 2027.¹

Michigan has no statutory reserve-funding percentage. This is now the number that binds Michigan condominium associations in practice.

The change that already happened

A second reserve requirement took effect earlier and is already in force. For applications dated on or after 3 August 2026:

• the project's budget must include the highest recommended reserve allocation amount in the reserve study; and
• that amount must not be based on a baseline funding method — Freddie Mac's bulletin defines it as one “where the reserve cash balance approaches but never falls below zero.”

Baseline funding is how a great many Michigan reserve studies have been presented, because it produces the lowest defensible contribution. It is no longer acceptable.

Why the GSEs did it, in their own words

Freddie Mac's stated rationale: “we have seen a correlation between Condominium Projects with underfunded reserves for capital expenditures and those in need of Critical Repair… unit owners can experience substantial financial hardship through unexpected special assessments or higher HOA assessments, leading to Mortgage default or foreclosure.”

1. Freddie Mac Guide Bulletin 2026-C, 18 March 2026 — reserve allocation increase and baseline-funding prohibition ↩
2. Client alert summarising Fannie Mae Lender Letter LL-2026-03 (18 March 2026) and its effective dates ↩
3. Analysis of Fannie Mae's 15% reserve requirement and its application to association budgets ↩