Fannie Mae Condo Reserve Requirements: The 15% Rule for 2027

Fannie Mae condo reserve requirements rise from 10% to 15% of a condo budget's annual assessment income, meaning the regular dues it plans to collect. The new floor applies to loan applications dated on or after January 4, 2027, under Fannie Mae Lender Letter LL-2026-03, and Freddie Mac matched it. A budget below that floor fails the lender's Full Review unless a qualifying reserve study backs it up.

Full Review is the lender's building check. It checks the budget, insurance, and records. A building that fails can become non-warrantable, and lenders then can't sell its condo loans to Fannie Mae or Freddie Mac. Reserves also decide how much of the next covered loss lands on owners as a special assessment.

How Fannie Mae condo reserve requirements change in 2027

Today a condo budget must put at least 10% of its assessment income into replacement reserves, the savings set aside for big repairs like a new roof or elevator. For loan applications dated on or after January 4, 2027, the floor becomes 15%. Fannie says the formula, the income subtractions, and the reserve study option stay the same.

What changes between the 10% and 15% test

Of all the Fannie Mae condo budget requirements, this is the one a lender checks with plain arithmetic. The formula is in Selling Guide B4-2.2-01, Fannie's rulebook for lenders, and the insurance half of the same review is in Fannie Mae's condo insurance requirements.

When does the 15% rule apply to a sale?

The 15% test applies when a lender runs a Full Review on a loan application dated on or after January 4, 2027. The application date controls, not the closing date. Two buyers in the same building can face different tests a week apart, depending only on when each one applied.

The 10 to 15 percent reserve rule is the last of the 2026 changes. Freddie Mac's version (Bulletin 2026-C) keys off the date the lender receives the loan application. Fannie's August notice (SEL-2026-07) is why the Selling Guide still says 10% today, though lenders apply 15% from January 4.

Reserve rule timeline, 2026 to 2027

How to work out your 15% reserve number

Divide the budget's yearly reserve line by assessment income, after the lender's subtractions. Under 15%? The gap is 15% of that income minus your current reserve line. Closing it with a dues increase costs more than the gap, because new dues also raise the income you divide by.

A hypothetical 120-unit budget

Take a hypothetical 120-unit condo association. Its 2027 budget collects $1,000,000 in regular dues, including $30,000 for bulk internet the association buys and bills back to owners. Reserves come out of general dues.

1. Start by subtracting the internet charge, because that money passes straight through to owners. That leaves $970,000 of assessment income.
2. Test the current line. At $100,000, reserves are about 10.3% of $970,000, which passes today and fails the 15% floor.
3. Take 15% of $970,000 to get $145,500. The gap is $45,500, or about $379 per unit a year ($31.60 a month).
4. Now try the dues-hike version. New dues raise income too, so reserves must reach about $153,529, roughly $446 more per unit a year ($37.17 a month).

Moving $45,500 out of operating lines instead keeps income flat, so $145,500 still works. The condo reserve budget requirement is a ratio applied to your actual budget, so have your treasurer run the real numbers. If part of your dues income goes straight into reserve accounts, lenders may subtract that income too, which shrinks the base.

Can a reserve study replace the 15% test?

Yes, a qualifying reserve study can replace the 15% test. The budget must fund its highest recommended allocation, funded reserves must meet the study's recommendations, and the study can't rely on baseline funding. A reserve study is a professional forecast of when the building's major parts, such as the roof and elevators, wear out and what replacing them costs.

The study must also be completed within three years of the lender's project approval date by an independent preparer. Freddie Mac's condo mortgage FAQ also lets lenders ask Freddie to waive the reserve rule for an established building that misses it, through a Project Waiver Request. Fannie also lets buildings with 10 or fewer units skip most of the project review, subject to conditions.

Why special assessments don't count as reserves

A special assessment can't stand in for the budget's reserve line when a lender runs the 15% test. That's a one-time bill on top of dues. Freddie Mac's FAQ says special assessments "cannot be used in lieu of" the budget reserve allocation. Fannie's Guide also lets lenders leave that income out of the base.

Boards sometimes treat a future assessment as reserves in waiting. Lenders see a collection risk instead. Under a separate Full Review test, unrelated to the reserve floor, no more than 15% of units can be 60 or more days behind on regular dues. Lenders also check, separately, how many owners are behind on each special assessment.

Lender Letter LL-2026-03 ties the change to that risk. It warns that owners in underfunded projects "can experience substantial financial hardship from unexpected special assessments or higher regular assessments or dues, leading to mortgage default or foreclosure." A bigger reserve line is meant to spread a new roof's cost over years of dues.

How Fannie Mae's 15% reserve rule affects your HOA master deductible

A board looking for reserve money may raise the deductible on its HOA master property policy to cut premium. The deductible is what the association pays on each covered loss before the insurer pays. Fannie limits a per-occurrence deductible to 5% of the master policy's coverage amount.

For loan applications dated on or after July 1, 2026, Fannie also caps a per-unit deductible at $50,000 per unit. If the master policy has a per-unit deductible, the borrower must carry a unit-owner policy with at least that much coverage. Spending reserves on a deductible can also delay the repairs they were saved for.

Whatever reserves can't absorb becomes a special assessment split across owners, and loss assessment coverage on the unit-owner (HO-6) policy pays an owner's share. For how that share gets split, see who pays the HOA master policy deductible.

What your board should do before the January 4 reserve deadline

Settle the reserve ratio (reserves divided by assessment income) and the master-policy deductible in the same meeting, before the 2027 budget is adopted. The adopted budget is what buyers' lenders will see, and changes made later can arrive after a sale is already in review.

1. Have your manager compute the ratio using the lender's subtractions.
2. If you're under 15%, pick reallocation, a dues increase, or a qualifying reserve study funded at its highest recommendation.
3. Update your condo questionnaire answers so they match the adopted budget.
4. Price the master policy at two deductibles and weigh the premium saved against owner exposure (see insuring an HOA with little in reserve).
5. Tell owners the final deductible so they can check the limits on their HO-6 policy.

Coverwatch shops homeowners association insurance across carriers and shows the board what each deductible option does to premium and to owner exposure. Send us the draft budget and your declarations page (the policy's summary of limits and deductibles) before the meeting, and we'll price the options in time.