Industry update - Fannie Mae & Freddie Mac condo policy

Will your condo still be financeable in 2027?

New conventional-financing rules that could impact property values, sales, and buyer demand. Preparation starts now - waiting creates risk.

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Who this affects

If condos touch your business, this touches you

  • Real estate agents & brokers - listing or selling condo units
  • Condo HOA boards - setting 2027 budgets this fall
  • HOA management firms - preparing documentation lenders will demand
  • Insurance agents - master policy and HO-6 requirements are changing
  • Condo unit owners - resale value depends on staying financeable
The core question Can the next buyer get a loan? If the answer becomes no, values follow.

Why this matters

Financing drives value

1

Financing drives buyer demand

Most condo buyers need a conventional loan

2

Demand drives property values

Fewer eligible buyers means softer prices

3

Warrantability is the gate

Lose it and the buyer pool shrinks to cash and non-QM

Loss of warrantability = fewer buyers. It impacts HOAs, agents, managers, and sellers alike.

The key word

What does "warrantable" mean?

A condo project that meets the lending guidelines established by Fannie Mae and Freddie Mac. When a project is warrantable, buyers can use normal conventional financing.

Criteria 1HOA financial healthbudget, reserves, delinquencies
Criteria 2Owner occupancyand single-entity ownership concentration
Criteria 3Condition & litigationno major safety-related deferred maintenance

Mark the calendar

Three dates that change condo lending

{{dates.insurance}}Insurance changesroof coverage, inflation guard, deductibles, HO-6
{{dates.limitedReview}}Limited review eliminatedfull underwriting of HOA financials on every deal
{{dates.reserves}}15% reservesup from 10% - a 50% increase in required funding
Fall 2026 budget season is when boards must act - 2027 budgets need the new reserve line before January.

The full picture

Before vs. after summary

CategoryBeforeAfter
Reserve contribution10%15%
Review processLimited review allowedEliminated - full review
Small project waiver2-4 unitsExpanded to 10 units
Investor concentrationRequiredRemoved
Reserve studiesFlexibleHighest level required
Roof coverageReplacement cost requiredActual cash value allowed
Inflation guardRequiredRemoved
Per-unit deductibles5% and geographic specific$50K max
HO-6 policiesLimitedMore common
Some rules loosened - but overall scrutiny increased significantly.

Change 1 - effective {{dates.reserves}}

Reserve requirements

BeforeAfter (eff {{dates.reserves}})
10% of budget15% of budget

A 50% increase in required annual reserve funding.

Insight: for many HOAs the max annual dues increase without community-wide approval is ~10%. Half of that headroom may be consumed by increased reserves.

Impact

  • Increased HOA dues pressure
  • Less flexibility in budgets
  • Short term: higher risk of special assessments to shore up budgets
  • Long term: lower risk of special assessments because reserves are stronger

Reserve studies

Using a study instead of the 15%? The bar just rose

When a reserve study is used in lieu of the 15% requirement, the budget must contain the fully funded (highest) recommended reserve allocation - and that recommendation may not use the baseline funding method (which lets the reserve balance approach zero).

BeforeAfter
Lower funding allowedHighest funding required
Baseline method allowedBaseline not allowed
Reserve reality For most communities, 15% is the standard Reserve studies do not impact the majority of communities.

Common misconception

Budget fact vs. fiction

Fiction "Lenders look at what we've accumulated" Reserves analysis based on what's saved up
Fact It's the current year's budgeted allocation Allocation, not accumulation (except when using reserve studies)
A well-funded reserve account does not satisfy the requirement by itself - the annual budget line must show 15%.

Change 2 - effective {{dates.limitedReview}}

Limited review eliminated

BeforeAfter (eff {{dates.limitedReview}})
Limited review availableEliminated
No financials requiredFull review required

Full underwriting of all HOA financials - on every conventional condo loan.

Impact

  • More documentation on every transaction
  • More scrutiny of budgets, reserves, insurance
  • More deals delayed - or denied

Change 3 - effective now

Investor concentration cap removed

BeforeAfter (eff now)
50% cap on non-owner occupants for investor purchasesRemoved

This is a big improvement for investors buying condos.

Impact

  • Helps investor-heavy projects regain financeability
  • Does not fix weak financials
  • Established projects only

Change 4 - effective {{dates.insurance}}

Insurance: the rules that loosened

Roof coverageActual cash value now allowedReplacement-cost basis no longer mandatory. Older roofs more insurable, more deals qualify.
Inflation guardRequirement removedOne less rider for master policies.
Per-unit deductibles$50K max per unitWas 5% and geography-specific. Pro tip: owners should carry matching "Loss Assessment Coverage."
HO-6 (walls-in) policiesRequired in more casesNeeded when the master policy excludes interior/improvements or carries a per-unit deductible - coverage must fill the gap.

Insurance bottom line

Insurance can make or break condo financing

  • Roof flexibility helps association coverage and costs
  • Coverage gaps kill deals
  • Higher complexity - master policy + HO-6 must fit together
Insurance action Full review with the association's broker - asap Before fall renewal and budget season.

The stakes

What happens if a project goes non-warrantable

Most buyers cannot get financing. Sales are limited to cash, private money, or non-QM loans - and values suppress.

The domino effect

  • Sales fall apart
  • Listings sit
  • Prices drop

Action plan

  • Plan reserves and review budgets now
  • Consider shifting 2027 maintenance items from the annual budget to reserves expenditure to balance against the new 15%
  • Pre-approve the project prior to listing to increase marketability
  • If non-warrantable: understand the financing solutions (next)

Net-net

Good news vs. challenges

Good news

  • Investor concentration cap removed
  • Roof coverage flexibility added
  • Insurance documentation options expanded
  • Inflation guard removed

Challenges

  • Higher reserves (10% to 15%)
  • Full review required on every loan
  • Insurance still expensive
  • More scrutiny overall
More flexible - but more demanding.

Your move

What this means for you

Real estate agentsPre-approve your condo listingsA project pre-approval before listing protects the sale price and the timeline.
HOA boardsPlan reserves & insurance now2027 budgets set this fall must carry the 15% line and updated master policy costs.
Management firmsPrepare documentationFull review means every deal needs complete, current financial packages.
Condo ownersTalk to your board before fall budget seasonMake sure the new criteria are in the 2027 budget - warrantability protects your resale value.
Lack of knowledge and planning provides no exemptions.

How I can help

Every condo still has a path

Warrantable-path services

  • Condo project approvals with a dedicated team
  • FHA spot approvals
  • HOA pre-approval service for listing agents

Non-warrantable solutions

  • Expanded program series for non-warrantable projects
  • Owner, second-home, and investor occupancy
  • Full doc or alt income (bank statements, W-2 only, 1099 only, investor cash flow)
  • Individual or LLC vesting

Key dates - recap

{{dates.insurance}} - insurance
{{dates.limitedReview}} - limited review gone
{{dates.reserves}} - 15% reserves

Let's get your buildings and listings ahead of this. Questions, project pre-approvals, or a session for your office or board - reach out.

This educational information is provided for homeowners, buyers, and industry partners. Equal Housing Opportunity. All loans subject to underwriting approval; certain restrictions apply. CrossCountry Mortgage, LLC NMLS3029 (www.nmlsconsumeraccess.org). Based on Fannie Mae / Freddie Mac condo project and insurance requirement updates announced 2026.

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