How Do the New Fannie Mae and Freddie Mac Reserve Funding Requirements Affect HOA and Condo Associations?

By Robert Nordlund, PE, RS | Association Reserves

At a Glance

New Fannie Mae and Freddie Mac requirements, announced March 18, 2026, raise the minimum Reserve funding standard for condominium associations from 10 percent to 15 percent of the total budget, effective for loan applications dated on or after January 4, 2027. For most associations, this changes little: the typical HOA already funds Reserves at 15 to 45 percent of its budget to properly maintain the property and avoid Special Assessments. Associations funding only at the old 10 percent floor are typically already underfunded and face elevated Special Assessment risk with or without the new rule. Association Reserves has prepared more than 100,000 Reserve Studies since 1986 and helped establish the National Reserve Study Standards endorsed by the Community Associations Institute.

What Exactly Changed With the New Fannie Mae and Freddie Mac Requirement?

Fannie Mae and Freddie Mac announced on March 18, 2026 that they are raising the minimum Reserve funding requirement for condominium associations from 10 percent of the total budget to 15 percent. The new floor takes effect for loan applications dated on or after January 4, 2027. Associations that fall below that minimum will need either to raise Reserve contributions to at least 15 percent of budget, or to demonstrate through a current Reserve Study that they are funding at the highest recommended level in the study rather than a lower-funding alternative.

Condominium board members reviewing an association budget and reserve funding plan

Will This Make Condo Living More Expensive?

For most associations, no. Most condominium associations already need to fund Reserves at approximately 15 to 45 percent of their total budget, with most near 25 percent, to properly maintain the property and avoid Special Assessments. Associations funding only at the old 10 percent minimum are typically already underfunded and carry a high risk of future Special Assessments, independent of what Fannie Mae or Freddie Mac require.

For those underfunded associations, raising the minimum from 10 percent to 15 percent doesn’t mean homeowners pay more overall. It shifts Reserve funding into the regular monthly budget, which tends to reduce the frequency and size of future Special Assessments compared to relying on emergency funding after the fact.

Does This Change How Reserve Studies Are Prepared?

Some have asked whether the new requirement will fundamentally change how Reserve Studies are built, since Fannie Mae and Freddie Mac will disregard Baseline Funding Plans and other lower-funding options when evaluating whether an association meets the standard. For associations already funding above the 15 percent minimum, the answer is no: Reserve Studies will continue to present multiple Funding Plan options, including more aggressive Baseline scenarios, because Fannie Mae and Freddie Mac don’t dictate a specific Funding Plan as long as the association is funding Reserves above 15 percent of budget.

What About Associations Relying on an Exemption?

For the few associations that have claimed a legitimate exemption from the higher minimum standard, that exemption will no longer be available unless it’s based on the most conservative Funding Plan found in their Reserve Study. From a lender’s perspective, this helps confirm that an association claiming an exemption is genuinely planning for long-term sustainability, not simply choosing whichever Funding Plan produces the lowest contribution requirement.

Key Takeaways

The Fannie Mae and Freddie Mac minimum rises from 10% to 15% of budget, announced March 18, 2026, effective for loan applications dated January 4, 2027.
Most condominium associations already fund Reserves well above 15%, commonly in the 15-45% range, so the new floor changes little in practice for well-run associations.
Associations funding only at the old 10% minimum were already underfunded and at elevated risk of Special Assessments, independent of this rule change.
Well-funded associations keep full flexibility in Funding Plan choice; Fannie Mae and Freddie Mac don’t dictate a specific plan above the 15% threshold.
Associations relying on a Reserve-Study-based exemption from the minimum must now use the most conservative Funding Plan option, not a Baseline plan.

Confirm Where Your Association Stands

Since 1986, Association Reserves has prepared more than 100,000 Reserve Studies for communities across all 50 states. If you want to confirm where your association stands relative to the new Fannie Mae and Freddie Mac minimum, request a proposal or speak with the Reserve Specialist serving your region.

Frequently Asked Questions

What is the new Fannie Mae and Freddie Mac Reserve funding requirement?

Fannie Mae and Freddie Mac announced on March 18, 2026 that they are raising the minimum Reserve funding requirement for condominium associations from 10% to 15% of the total annual budget, effective for loan applications dated on or after January 4, 2027.

Will the new 15% minimum make condo living more expensive?

For most associations, no. Most condominium associations already fund Reserves at 15% to 45% of their budget to properly maintain the property, well above both the old and new minimums. Associations funding only at the prior 10% floor were typically already underfunded and at elevated risk of Special Assessments.

Does the new requirement change how Reserve Studies are prepared?

Not for associations already funding above 15% of budget; Fannie Mae and Freddie Mac don’t dictate a specific Funding Plan as long as funding stays above that threshold. Associations relying on a Reserve-Study-based exemption from the minimum must now use the most conservative Funding Plan option rather than a Baseline plan.

What is the difference between Baseline Funding and Full Funding?

Baseline Funding keeps the Reserve cash balance near zero, offering little margin for error and higher Special Assessment risk. Full Funding keeps the Reserve balance in line with the value of accumulated deterioration, offering more protection. Both can be calculated using the cash flow method.

Who is most affected by the new Fannie Mae and Freddie Mac minimum?

Associations funding Reserves at or near the old 10% minimum are most affected, since they will need to either raise contributions to at least 15% of budget or demonstrate, through a current Reserve Study, that they are funding at the highest recommended level.