Where the two regimes now part company

As of 2026 a Michigan condominium project can be:

• Ineligible for conventional financing because its reserve allocation is below 15% of budgeted assessment income from 4 January 2027, or because its master-policy per-unit deductible exceeds $50,000, or because it lost its light-touch review path on 3 August 2026 — and still FHA-approvable, because none of those standards exists in Handbook 4000.1.
• Or the reverse: eligible conventionally but not FHA-approvable, because owner-occupancy has fallen below 50% — a threshold Fannie Mae has now abandoned entirely, having eliminated its 50% investment-property concentration limit.

Those are genuinely different failure modes, and until this year they broadly moved together.

Why the divergence favours Michigan

Michigan's condominium stock skews old, small, suburban and inexpensive — the profile that struggles most with a 15% reserve floor and a capped deductible, and the profile that FHA buyers actually buy.

For a Michigan association with an underfunded reserve and an ageing roof, FHA approval is now the more forgiving path, and for many projects it will be the path that keeps a functioning resale market. That is a genuine reversal: FHA approval has historically been treated as the harder, fussier option that small boards skipped.

What a board can do about it

1. Find out whether the project is currently FHA-approved, and if so when the three-year term expires. Recertification lapses quietly and nobody tells the board.
2. Check owner-occupancy against the 50% line. This is the threshold Michigan projects with heavy investor ownership fail, and it is now the FHA-specific risk rather than a shared one.
3. Consider single-unit approval. Where the project as a whole cannot be approved, FHA's single-unit approval route at Handbook 4000.1 II.C can keep individual sales alive.
4. Do not treat FHA as a substitute for fixing reserves. It buys time. The GSE standards still determine what most buyers can borrow, and a project that leans on FHA indefinitely is a project whose owners are selling into a narrower market at lower prices.

The wider point about who regulates Michigan associations

Michigan has no agency with authority over association conduct, no reserve mandate, no milestone-inspection statute, and no insurance rules for master policies. What Michigan associations actually answer to, in financial terms, is the secondary mortgage market — and that market is now speaking with two voices.

A board's compliance posture therefore has to be plural. There is no single standard to meet.

What to watch next

Whether HUD issues a condominium Mortgagee Letter aligning FHA with the GSEs. There is no announced rulemaking. If FHA does eventually follow, Michigan's older projects lose their remaining soft landing, and the run-up to that would be the moment reserve funding stops being optional in practice as well as in theory.