Recent updates from Fannie Mae and Freddie Mac may affect how condominium associations are evaluated during the home buying and refinancing process. While these changes primarily apply to lenders participating in Fannie Mae and Freddie Mac loan programs, they place greater emphasis on an association’s financial stability, insurance coverage, reserve funding, and overall community health.

As a result, condominium boards may see an increase in requests for financial, insurance, and maintenance documentation from homeowners, prospective buyers, lenders, and real estate professionals. Understanding these changes can help your association stay prepared and support a smoother lending process.

Insurance Requirements Have Changed

The first round of updates took effect in July 2026 and applies to condominium associations that maintain master insurance policies. The revised standards update certain property insurance requirements, remove the previous inflation guard requirement, eliminate the requirement for association master policies to insure roofs at replacement cost, and establish a maximum deductible of $5,000 per unit under qualifying master policies.

Boards should work closely with their insurance professionals to ensure their coverage continues to meet both their governing documents and current lending expectations.

Project Reviews

Beginning in August 2026, the Limited Project Review process is being retired, meaning many condominium transactions will require a more comprehensive Full Project Review to determine mortgage eligibility. As part of this review, lenders may evaluate an association’s financial health, reserve funding, insurance coverage, pending litigation, and structural inspection and maintenance records.

The updated guidelines also provide some flexibility by offering review waivers for certain small associations with 10 units or fewer and by removing previous limits on investor ownership concentration.

Reserve Funding in 2027

Beginning in January 2027, Fannie Mae and Freddie Mac will increase the reserve funding benchmark used during project reviews from 10% to 15% of an association’s annual budget. Associations that do not meet the 15% benchmark may still satisfy the requirement by having a reserve study completed or updated within the past three years and funding reserves at the level recommended by that study.

These changes reinforce the importance of long-term financial planning and regularly evaluating reserve needs to help protect an association’s financial health and support future lending opportunities.

What Does This Mean for Your Community?

As lenders place greater emphasis on these factors, homeowners, prospective buyers, and their agents may also take a closer look at an association’s financial, operational, and physical health during the buying, selling, or refinancing process. As a result, boards may experience an increase in requests for financial, insurance, reserve, and maintenance documentation during mortgage reviews and real estate transactions.

While these changes may not require immediate action from every condominium association, they do reinforce the importance of proactive financial planning, adequate reserve funding, and maintaining appropriate insurance coverage. Boards should work closely with their community management team, association attorney, insurance advisor, and reserve specialist to determine whether any updates or planning efforts may be appropriate for their community. Sentry Management clients can use Insured-By, an industry-specific insurance program that can enhance coverage and offer discounted premiums, if a board would like to speak with an insurance professional.

By staying informed and planning ahead, boards can help position their communities for long-term financial stability while supporting homeowners who are buying, selling, or refinancing their homes.