New Fannie Mae & Freddie Mac Lending Guidelines And What They Mean To Your Association

Imagine that an owner at your Ormond Beach condo who is ready to sell their unit. The buyer is pre-approved, everything looks good…until the lender signals that the association doesn’t have enough reserve funding. 

This scenario will become more likely throughout Daytona Beach, Brevard County, and Central Florida if associations disregard what was announced back on March 18 of this year by Fannie Mae and Freddie Mac. They are implementing big changes that will overhaul the way condo projects will be vetted for conventional mortgage approval. 

No More Limited Review 

The “limited review” process option will be eliminated as of August 3. These types of reviews have historically applied to about 40% of all projects. Once it is discontinued, nearly all condo sales will require a full review. This means more documentation, lender questionnaires, and more intense financial scrutiny. For many Volusia County communities where condo sales drive the market, boards and property managers need to be organized. Mix-ups or delays in providing this documentation could slow closings. 

The silver lining is that projects of 10 units or fewer will now be eligible for a waiver. The standard 50% concentration limit on investors will also now be done away with. 

Reserve Funding Increase 

One change that board treasurers should pay special attention to is coming up on January 4, 2027; minimum reserve funding will increase from 10% of the annual budget to 15%. Associations with a recent reserve study (updated within three years) that maintain industry standards for highest recommended funding can meet this threshold without ever being over 15% in any given year The trouble is, many communities have not updated their studies in recent years. This can mean more assessments and tighter lending.

New Insurance Requirements 

Anyone managing coastal Florida property knows the insurance market has been brutal. Fannie Mae and Freddie Mac took notice. They will no longer require strict replacement cost paperwork, roofs will no longer need to be covered at full replacement cost, and the inflation guard requirement will be dropped. 

A new $50,000 per-unit maximum deductible will be introduced July 1, 2026. Communities carrying higher deductibles must adjust, or risk losing warrantable status. In addition, each unit owner must obtain separate insurance (usually an HO-6 policy), in order to cover anything that the master policy may miss. 

Three Action Items For Associations  

HOAs and COAs need to be proactive by reviewing their reserve studies and funding levels. They also need to look at their insurance coverage to see if changes are needed to comply with the new deductibles. They should also be prepared to answer lender questionnaires regarding unit sales. Before these deadlines arrive, it is important to consult qualified professionals like designated community association managers, insurance professionals and legal advisors to ensure compliance. 

If you are in a managed community, this is the time to get ahead of it all. That is really the best way to protect property values and keep financing flowing.