Fannie Mae And Freddie Mac Update Lending Guidelines – What Do Condominium Associations and Co-Ops Need to Know?

Fannie Mae (“Fannie”) and Freddie Mac (“Freddie”) recently introduced significant changes to their condominium and community association lending guidelines (available here). These changes will influence whether conventional financing will be available for both purchases and refinancings of condominium units and residential cooperative shares and thus will have a major impact on condominium associations and co-ops.

Below is a summary of the changes to Fannie and Freddie’s lending guidelines:

Reserve Funding Increase & Enhanced Reserve Study Requirements

There are two changes that impact reserve funding and annual budgeting:

First, starting January 4, 2027, the minimum reserve contribution will increase to 15% of the total annual budgeted income. The current reserve contribution minimum is 10% of annual budged income.

Second, starting August 3, 2026, when a lender relies on a reserve study to determine eligibility, the lender must verify that the condominium association or co-op’s reserves are being funded at the highest level recommended in such reserve study.

It is expected that these changes will put pressure on condominium and co-op boards to increase reserve contributions to maintain eligibility for Fannie- and Freddie-backed loans.

Limited Review is Gone – Expect More Lender Questionnaires

Limited project review is being phased out as of August 3, 2026. After this date, condominiums and co-ops with more than ten units must undergo full project review, which requires completion of Fannie Form 1076 / Freddie Form 476 (available here). For consistency and efficiency, it is recommended that condominium associations and co-ops use the official Fannie and Freddie forms, rather than modified versions that are specific to individual lenders.

Smaller Condominiums and Co-Ops Get Some Relief

Effective immediately, condominium associations and co-ops with ten or fewer units are eligible for project review waiver. This means that smaller condominiums and co-ops will not have to undergo full project review, though certain requirements regarding building conditions will still apply.

Investor-Owner Cap Removed

A bit of good news: effective immediately, the 50% investor-owner cap has been removed. Previously, condominium and co-op buildings had to be more than 50% owner-occupied to be eligible for Fannie- and Freddie-backed loans.

Key Takeaways

• Fannie and Freddie implemented updated guidance that will impact loan eligibility for condominium units and co-op apartments.

• Going forward, condominium and co-op boards should take the increased reserve funding minimums into account when preparing their budgets to ensure eligibility for Fannie- and Freddie-backed loans.

• Boards should expect more requests for lender questionnaires (Fannie Form 1076 / Freddie Form 476) and work with their legal and management professionals to provide responses to these forms.

LP is committed to keeping our community association clients updated, informed, and prepared to navigate any Fannie and Freddie lending requirements. For questions about handling specific issues related to Fannie and Freddie loan eligibility and lender disclosures for condominium, community association or co-op loans please contact Howard Dakoff, Laura Marinelli, Adam Kahn, or Molly Mackey of LP’s Community Association Group.