Why this lands harder in Ohio than in most states

R.C. chapter 5311 leaves reserve funding to the declaration. There is no Ohio mandate, no required study, no statutory percentage, and no regulator checking. Ohio associations have historically funded reserves thinly precisely because nothing required otherwise.

That is now a federal underwriting wall that Ohio law never built. An association funding reserves at 6 or 8 percent of assessment income has been fully compliant with Ohio law and will be non-compliant with the standard applied to every conventional loan in the building from January. Our Ohio reserve studies page covers what the declaration typically does and does not require.

The timing is the trap. An Ohio board that adopts a 10 percent reserve budget in October 2026 has already failed the standard that applies to loans originated in January 2027. Budgets are annual; the standard is not waiting for the next one.

What a failed project review actually costs

Not a fine. Something worse and slower: the building stops trading normally.

A unit that cannot be conventionally financed is sold to a cash buyer or an investor, usually at a discount. Investor concentration rises. Owner-occupancy falls. Both of those are separately measured by FHA, which still enforces a 35 percent owner-occupancy floor and a 10 percent individual-owner concentration limit for projects of 20 or more units — limits Fannie and Freddie both retired in March 2026.

So an Ohio project can now be conventionally financeable and FHA-ineligible at the same time, or the reverse, and a board tracking only one of them is tracking half the picture.

The other two dates already in force

July 1, 2026 — the per-unit deductible cap. Fannie: “the maximum allowable per unit deductible for all required property insurance perils covered by a master property insurance policy is $50,000 per unit.” Separately, the Selling Guide caps the overall deductible at 5 percent of the master coverage amount. An Ohio association that took a high per-unit wind or hail deductible to hold down premium is making its own units unfinanceable.

And any per-unit deductible at all triggers an owner obligation: “The borrower must have a unit owners property insurance policy when: any portion of the interior of the unit or improvements to the unit are not covered by the master property insurance policy, or the master property insurance policy includes a per unit deductible.” Freddie requires that HO-6 to be at least equal to the per-unit deductible.

March 18, 2026 — two requirements retired. “Roofs must be insured, but do not have to be insured on a replacement cost basis,” and, in Freddie's words, “The inflation guard requirement has been retired in its entirety.”

Read the second one carefully. Inflation guard was the endorsement that quietly raised an association's stated replacement cost each year. With it retired, keeping the replacement-cost figure current is now entirely the board's job, in a construction-cost environment that has moved sharply. An association that has not revalued in three years may be materially underinsured and will discover it at a claim.

The four things to do before you adopt the budget

Calculate 15 percent of annual budgeted assessment income and compare it to your reserve line. That is one arithmetic operation and it tells you whether you have a problem.

If you use a reserve study, check which funding level it recommends and which one you fund. Baseline funding is no longer acceptable. Highest recommended allocation is the test.

Ask your agent for the per-unit deductible on the master policy, in writing. If it exceeds $50,000, fix it at renewal. If there is any per-unit deductible, tell the owners they need an HO-6 at least that large.

Refresh the replacement-cost valuation. With inflation guard gone, nobody else will.

One sourcing note: Fannie's and Freddie's own sites block automated access, so the lender letter and bulletin were read from the documents themselves via other hosts. The January 4, 2027 date and the 15 percent figure were re-confirmed against Freddie's Bulletin 2026-6 of May 6, 2026, which incorporated the March changes into the Guide without altering them, and against Fannie's live Selling Guide.