Fannie Mae and Freddie Mac’s condo rule changes are creating new due diligence issues for agents as key compliance dates arrive this summer. The rules were issued in March through Fannie Mae’s Lender Letter LL-2026-03 and Freddie Mac’s Guide Bulletin 2026-C, but the transaction impact is hitting now.
A per-unit deductible standard applies to loan applications dated on or after July 1, 2026. Fannie Mae’s Limited Review process must be retired for loan applications dated on or after Aug. 3, 2026. For Full Review projects, the higher reserve requirement takes effect Jan. 4, 2027.
Smaller projects get more flexibility
Fannie and Freddie expanded the Waiver of Project Review to new and established condo projects with 10 or fewer units. Projects with five to 10 units do not qualify for the waiver if they are part of a master association or larger development.
Established projects also get relief from one prior barrier. Fannie Mae retired the 50% investment-property concentration limit for established condo projects reviewed under Full Review. That may help some investor-heavy or urban buildings that previously had trouble qualifying, but more projects will need Full Review once Limited Review is retired.
Insurance flexibility raises buyer risk
The insurance updates give associations more room to manage rising premiums and limited coverage availability. Roofs still must be insured, but they no longer have to be insured on a replacement-cost basis. Fannie Mae also retired the inflation guard requirement for project developments, while keeping the requirement that master property insurance cover at least 100% of the estimated replacement cost value of project improvements, including common elements and residential structures.
For required property insurance perils covered by a master policy, the maximum allowable per-unit deductible is $50,000. That standard applies for loans with application dates on or after July 1, 2026.
If the master policy has a per-unit deductible, the borrower must carry a unit-owner policy. That policy must cover the greater of the uncovered interior or improvement exposure, or the per-unit deductible if one applies. The maximum deductible is the greater of 5% of coverage or $2,500.
A project may qualify for conventional financing while still leaving buyers with meaningful loss-assessment or out-of-pocket risk after a covered event.
Reserve rules add deal friction
For Full Review projects, Fannie Mae is raising the minimum reserve allocation for capital expenditures and deferred maintenance from 10% to 15% of annual budgeted income assessment. The change applies to loan applications dated on or after Jan. 4, 2027.
The policy targets deferred maintenance risk, underfunded reserves, and long-term project sustainability. The National Association of Realtors summarized the changes as a mix of added flexibility for smaller projects and more compliance pressure for larger or more complex developments.
Agents should ask for the budget, reserve study, insurance certificates, delinquency information, and recent meeting minutes earlier in the process. A condo can look marketable at the showing stage and still create financing friction if the association cannot document reserves, insurance, or deferred maintenance status.
Delay request has not changed the timeline
Mortgage brokers have pushed back on the rollout. In June, the National Association of Mortgage Brokers asked FHFA to delay key provisions by 12 months, warning that the schedule could push some established projects into non-warrantable status, reduce buyer pools, and slow closings.
FHFA has not announced a delay, and the agency said the policies are being implemented on schedule. A buyer shopping this summer could face a different project review standard by underwriting if the loan application lands on or after Aug. 3.
What to verify before writing a condo offer
Before writing an offer, agents should confirm whether the project qualifies for a Waiver of Project Review or requires Full Review. They should also verify the reserve allocation, the path to the 15% requirement, and any deferred maintenance, critical repairs, or special assessments in recent documents.
Agents should ask whether the master policy has a per-unit deductible, whether roof coverage is written on replacement-cost or actual-cash-value terms, and whether the buyer’s HO-6 policy aligns with the master policy. For listing agents, gathering those documents before launch can prevent late-stage underwriting surprises.