Fannie Mae Fidelity Bond Requirements: How to Calculate Your HOA's Limit (2026)

Under Fannie Mae fidelity bond requirements, a condo association needs a crime limit of at least three months of assessments on every unit, provided it documents one financial control. Without a control, the minimum becomes the most money the association and its manager hold on any single day. Boards get the limit wrong in both directions, by adding reserves Fannie doesn't ask for or leaving them out when a Federal Housing Administration (FHA) buyer needs them counted.

For background on which lenders and states require the coverage at all, see our HOA fidelity bond requirements guide. The rest of Fannie's insurance rules are in our Fannie Mae condo insurance requirements guide.

Fannie Mae fidelity bond requirements in one formula

Fannie Mae starts from the maximum funds in custody, the most the HOA or its management agent holds at any time (Selling Guide B7-4-02). With one or more financial controls, the minimum drops to three months of assessments on all units. Fannie doesn't add reserves to that figure, and FHA always does.

Freddie Mac Guide Section 4703.6 follows the same Fannie Mae fidelity coverage formula, so the three-month figure works as a discount an association earns by documenting a control. FHA's rule, set in the U.S. Department of Housing and Urban Development (HUD) Handbook 4000.1, has no discount and applies to condo projects with more than 20 units.

Which financial controls lower the Fannie Mae limit?

Any one of three controls is enough: separate operating and reserve accounts with statements sent to the association, a manager with no authority over the reserve account, or two board signatures on reserve checks. The lender confirms the control from the legal documents or another acceptable source.

• Separate bank accounts for operating and reserve funds, each with access controls, and the bank sends monthly statements straight to the association.
• The management company keeps separate records and bank accounts for each association it serves. It has no authority to write checks on, or move money out of, the reserve account.
• Two board members sign every reserve check.

Separate accounts alone don't satisfy the first control if the bank mails statements only to the manager. Freddie's version reads stricter to us, because its lower limit depends on the project documents requiring the controls. So a control written only into board minutes can pass a Fannie lender and still fail a Freddie review, which surprises boards that assume the two agencies match.

How to calculate HOA fidelity bond amounts

Knowing how to calculate HOA fidelity bond amounts comes down to two numbers: three months of assessments on every unit, and the highest combined balance across every account the association or its manager holds. The financial controls pick between them for Fannie and Freddie, while FHA adds reserves to the first one in every case.

1. Add up one month of regular assessments for every unit, then multiply by three. If dues vary by unit size, total each unit's actual charge. Delinquent units don't drop out of the total.
2. List every account held for the association, including reserve certificates of deposit (CDs) and special assessment accounts, and find the highest combined balance on any one day.
3. Check whether a control is documented and, for Freddie, whether the project documents require it.
4. For Fannie or Freddie, use step 1 if a qualifying control applies (B7-4-02). Use step 2 if none does.
5. For FHA, add reserves to step 1, up to any state-law maximum (HUD 4000.1), then compare the total with your state's statutory minimum and use the larger figure.
6. Check the result against your crime policy declarations page (the summary page that lists limits and deductibles).

Worked example: fidelity limits for a 140-unit condo

Take a hypothetical 140-unit condominium that bills $450 a month per unit, holds $610,000 in reserves, and is collecting a roof assessment. Three months of assessments comes to $189,000. That is the Fannie figure once a control is in place, and the Freddie figure once the project documents require one.

The $968,000 no-control figure assumes all three accounts peak on the same day, which happens here in the month the roof assessment comes in. With a control in place (written into the project documents, for Freddie), a single $799,000 limit clears all three programs. The board can then buy one policy without guessing the next buyer's loan type.

What counts as maximum funds in custody?

Maximum funds in custody is the highest total the association and its management agent hold at one time, across every account. Fannie's rule measures custody "at any time," so the test is the peak combined balance. That's why a year-end figure or a monthly average can understate it badly.

For example, a special assessment sits in the bank until the contractor is paid, and a large property claim check can land weeks before repairs start. Associations that bill dues once a year hold most of the annual budget right after the due date.

Spreading money across several banks won't lower the number. The custody test adds every account together, including accounts opened to stay under federal deposit insurance limits.

When the management company holds HOA reserves

Money the management company holds for the association counts toward custody, because Fannie's test names the HOA "or its management agent." Signing authority over the reserve account matters too, since it decides whether the second control is met and whether the three-month figure applies.

A management agreement that lets the manager write reserve checks or move reserve money breaks the second control. It also fails if the manager pools several associations' funds in one account. The association can still qualify through the first control (separate accounts with statements sent to the board) or the third (two board signatures on reserve checks).

Fannie's rule also requires the policy to cover anyone who handles association funds, including the management company. Our guide to naming the management company on the HOA crime policy explains whether to add it as an insured. Managers can check their own coverage with insurance for HOA management companies.

Wires sent after a spoofed email raise a separate coverage question, and our guide to HOA social engineering and wire fraud insurance answers it.

Fidelity exemptions, state law, and the FHA tolerance

Fannie Mae skips the fidelity requirement for projects of 20 units or fewer, projects whose coverage would be $5,000 or less, and loans that qualify for a waiver of project review. The HUD handbook applies FHA's rule above 20 units, with no $5,000 exemption. FHA also accepts an existing policy short by up to 3% or $10,000, whichever is less.

Take a hypothetical 24-unit association billing $65 a month. Three months of assessments is $4,680, so with a control in place Fannie requires no fidelity coverage. Without a control, Fannie's custody test applies, and $38,000 in reserves alone puts the requirement at $38,000 or more. An FHA loan would need $42,680 ($4,680 plus reserves).

In the 140-unit worked example above, 3% of $799,000 is $23,970, so FHA's $10,000 cap controls. An existing $790,000 policy passes FHA review, and a $785,000 policy fails it.

Fannie and Freddie both accept a state's statutory fidelity requirement in place of their own, and FHA uses the state minimum when it is higher. Compare your state in our state fidelity bond comparison, and California boards should read the Davis-Stirling 5806 breakdown.

How to put the fidelity limit on a lender questionnaire

The standard full condo questionnaire (Fannie Mae Form 1076, also Freddie Mac Form 476) has the HOA check which financial controls it follows and list its fidelity carrier and policy number. Lenders using their own forms may also ask for the limit. Check that limit against the Fannie, Freddie, and FHA minimums before anyone signs the lender condo questionnaire.

If the limit is short, raise it with an endorsement (a written change to the policy) before the next sale closes. Our HOA crime and fidelity coverage page lists the options.

When Coverwatch shops a crime renewal for an association, we run the Fannie, Freddie, and FHA minimums from the bank statements and the budget first, so the limit fits the loan programs your buyers use.