Condo reserves must reach 15 percent on January 4
Condo reserves must reach 15 percent on January 4
2026-09-15 · New Hampshire · Compliance
What happened. On March 18, 2026, Fannie Mae issued Lender Letter LL-2026-03, "Updates to Project Standards & Property Insurance Requirements," alongside a coordinated Freddie Mac bulletin, under direction from the Federal Housing Finance Agency.1 One of the staged changes lands on January 4, 2027: the minimum replacement-reserve allocation a condominium project must carry rises from 10 percent to 15 percent of total annual budgeted assessment income.
What the requirement says
The reserve floor is an eligibility condition, not a statute. A project that does not meet it fails Full Review, and loans in it cannot be sold to the two enterprises that buy most conventional mortgages in the country.
There is an exception, and it is the operative detail for most boards. Per the trade summary of the lender letter, the 15 percent minimum is waivable where the association has "a reserve study that has been conducted or updated within the last three years" and funds at the highest level that study recommends.1 A qualifying, current reserve study displaces the flat percentage.
Fannie Mae's stated reason for the change, as summarized by counsel reviewing the letter, was "a direct correlation between underfunded reserves and projects in need of critical repairs."2
Why New Hampshire is more exposed than most states
New Hampshire imposes no reserve-study requirement and no reserve-funding minimum on community associations. RSA 356-B, the Condominium Act, contains no such provision. There is no state floor that a New Hampshire association has been quietly meeting all along, and no state-mandated study sitting in the files that could be dusted off to claim the exception.
What it changes for a New Hampshire board
Nothing legally. This is investor eligibility criteria binding lenders who sell loans, not a rule binding associations. No New Hampshire board is obliged to fund reserves at 15 percent or to commission a study, and no regulator will cite it for failing to.
The coercion is economic and it is blunt. A condominium that cannot satisfy Full Review becomes non-warrantable. Units in it drop out of conventional financing, which shrinks the buyer pool to cash purchasers and portfolio lenders, which moves resale prices. For a board, the chain runs from a budget line to a unit owner's sale price, with no legal step in between.
The two routes, and the arithmetic
A board has a choice between a percentage and a study, and the choice is mostly about which one is cheaper for that association.
The flat route. Allocate 15 percent of total annual budgeted assessment income to replacement reserves. For an association budgeting $400,000 a year, that is $60,000 a year, up from $40,000 at the old 10 percent floor. The increase has to come from somewhere: an assessment increase, a reallocation from operating lines, or a deferral of something else.
The study route. Commission a reserve study, or update one conducted within the last three years, and fund at its highest recommended level. This is the better route where the study's number is below 15 percent — which is common in a newer building with long remaining useful lives on the big components, and uncommon in New Hampshire's older converted-mill and 1980s stock, where roofs, envelopes and paving are all aging together.
The trap in the study route is the words "highest recommended funding level." A study that offers a baseline plan and a fully funded plan does not let a board pick the baseline and claim the exception.
Timing that matters more than it looks
January 4, 2027 is a lender application date, not a board deadline. What determines whether a loan is eligible is when the borrower applies, which means the budget that has to satisfy the new floor is the one in effect when your owners' buyers go to the bank — in practice, the fiscal 2027 budget most New Hampshire associations adopt in the fall of 2026.
A board that adopts its 2027 budget in October or November 2026 at the old 10 percent, intending to revisit it, will be handing its owners a non-conforming project in the first week of January. A reserve study commissioned in December cannot be completed, reviewed and adopted in time.
What to watch next
Two other pieces of the same lender letter have already landed and are worth reading alongside this one: the $50,000 per-unit cap on master-policy deductibles that took effect July 1, 2026, and the retirement of Limited Review for established projects on August 3, 2026. Together they mean more New Hampshire projects going through Full Review, with reserves examined, at exactly the moment the reserve bar rises.
Watch also for whether the enterprises publish clarifying guidance on what counts as a qualifying reserve study. The three-year currency requirement and the highest-recommended-level condition are stated in summary form; the underwriting detail is where associations will discover whether the study they already have qualifies.
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