The reserve floor for condo financing rises to 15% on January 4, 2027
The reserve floor for condo financing rises to 15% on January 4, 2027
2026-09-15 · Mississippi · Compliance
From January 4, 2027, a condominium project whose budget allocates less than 15% of annual assessment income to reserves is ineligible for a conventional Fannie Mae or Freddie Mac loan. The floor was 10%. Freddie Mac Bulletin 2026-C and Fannie Mae Lender Letter LL-2026-03, both issued March 18, 2026 in consultation with FHFA, raised it.1
What changed, in the GSEs' own words
Freddie Mac's bulletin states that “[t]he reserve allocation for capital expenditures and deferred maintenance is being increased from a minimum of 10% to a minimum of 15% of the annual budgeted assessment income,” effective for mortgages with application received dates on or after January 4, 2027. Fannie Mae's letter mirrors it.
A second change lands sooner and is easy to miss. Effective August 3, 2026 — already live — 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 where the reserve cash balance approaches but never falls below zero.”
Freddie names the reason: a correlation between underfunded reserves and critical repair need, leading to “unexpected special assessments or higher HOA assessments, leading to Mortgage default or foreclosure.”
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