How the fifteen percent is actually measured

This is where associations get the arithmetic wrong, and the calculation is published:

“To determine whether the association has a minimum annual budgeted replacement reserve allocation of 10%, the lender must divide the annual budgeted replacement reserve allocation by the association's annual budgeted assessment income (which includes regular common expense fees).”

From January the numerator has to be fifteen percent of that denominator. What comes out of the denominator matters as much:

“incidental income on which the project does not rely for ongoing operations, maintenance, or capital improvements; income collected for utilities that would typically be paid by individual unit owners, such as cable TV or Internet access; income allocated to reserve accounts; and special assessment income.”

Special assessment income is excluded. An association that funds capital work through special assessments rather than reserves gets no credit for it in this calculation, and the special assessment does not inflate the denominator either.

The trap in reading the rulebook today

Fannie Mae's own Selling Guide still says ten percent. Its August 5, 2026 announcement says so expressly: “New standards for required reserves for projects will not be incorporated into the Selling Guide until after Jan. 4, 2027, when this change goes into effect for new loan applications.”³

A board or manager who checks the Selling Guide this autumn will read the old number and conclude nothing has changed. The operative instrument is the Lender Letter, not the Guide.

What this means at a North Dakota closing

A project that fails the reserve test on a Full Review is not a project a lender can deliver to Fannie Mae or Freddie Mac. In practice that means the owners in it cannot sell to a buyer using ordinary conventional financing, and cannot refinance on those terms either. The association is not sanctioned. Its owners simply find their units harder to sell, at prices that reflect it.

This is now a disclosure question too. Since August 1, 2025, N.D.C.C. § 47-10-02.3 has required a North Dakota association to furnish, within ten days of a seller's request, “The amount of reserve and capital funds available and committed to current or pending projects,” whether the association “uses a reserve study,” and “The current operating and reserve budgets and year-to-date financial statement.” A buyer's lender no longer has to dig for the number. The statute hands it over.

What a board faces between now and January

Run the calculation on your own budget. Reserve allocation divided by budgeted assessment income, with the excluded categories stripped out of the denominator. Most North Dakota associations have never done it in those terms.

If you are short, fix it in the budget you adopt this autumn. The test runs against the budget in force when the loan application is dated. A budget adopted in November or December for the 2027 year is the last one that lands before January 4. Our North Dakota budget approval page covers the mechanics and the vote.

Understand what the increase costs an owner. Moving from ten to fifteen percent on a budget of $200,000 is $10,000 a year across the membership. That is a real assessment increase, and it is better explained in October as a financeability requirement than in March as a surprise.

Do not assume a reserve study gets you there. The flexibility to rely on a study has its own conditions, and the funding method it recommends now matters as much as the number.

Note what North Dakota does not require. The state has no reserve funding mandate at all. SB 2394, which would have created one, failed in the Senate 0 to 46 in 2025. The pressure here is entirely from the mortgage market. Our North Dakota reserve studies page covers the state-law position.

What to watch next

Watch for the Selling Guide to be updated after January 4, 2027, which is when the published rulebook finally matches the operative rule. Watch, too, for North Dakota lenders to begin asking for the 2027 budget during the autumn — the application date governs, and a project that adopts a compliant budget late will have a gap in which its units are harder to finance.