Many people are concerned that the new Fannie Mae and Freddie Mac requirements, announced March 18, 2026, will make condo living more expensive because associations beginning in 2027 must fund Reserves at a minimum of 15% of annual budgeted assessment income instead of 10%.
Others have asked whether these changes will fundamentally affect how Reserve Studies are prepared, since Fannie and Freddie will ignore “Baseline” Funding Plans (and other lower-Funding Plan options).
The short answer to both questions is: No.
Will the New 15% Reserve Requirement Increase HOA Dues?
Most condominium associations already need to fund Reserves at approximately 15–45% of their total budget, with most near 25%, to properly maintain the property and avoid special assessments. Associations funding only 10% are typically underfunded and face a high risk of future special assessments.
For those associations, increasing the minimum from 10% to 15% does not mean homeowners will pay more overall. Instead, it shifts Reserve Funding into the regular monthly budget, reducing the frequency and size of future special assessments. Regular assessments or reserve contributions may need to increase in order to meet applicable standards and reduce reliance on future special assessments.
Can a Reserve Study Be Used Instead of the 15% Requirement?
Most associations already fund Reserves above the new 15% minimum and will continue using Reserve Studies that present multiple Funding Plan options, including more aggressive or “Baseline” scenarios. As long as the association is funding Reserves above 15% of budget, Fannie Mae and Freddie Mac don’t care about their specific Funding Plan. If the association’s budget satisfies Fannie Mae’s applicable standard replacement-reserve requirement, a lender generally does not need to rely on the reserve-study exception to satisfy that particular reserve-allocation test. The stricter methodology rules become important when a lender relies on a reserve study instead of the standard reserve-percentage test.
If a reserve study is being used as an exception to the standard reserve allocation requirement, baseline funding is not acceptable for applicable applications dated August 3, 2026 or later. The budget must instead reflect the highest reserve funding recommendation presented in the study. From a lender’s perspective, this helps ensure the association is indeed planning responsibly for long-term sustainability.
See more on this update in our Reserve Study FAQs here.
Key Dates
August 3, 2026: Updated reserve-study requirements became applicable, including restrictions on using baseline funding when a reserve study is used as an exception.
January 4, 2027: The applicable minimum replacement reserve allocation increases from 10% to 15% of annual budgeted assessment income.