Real estate education

The 2027 condo reserve change, without the confusion.

What 15% measures, when it applies, and why the reserve bank balance answers a different question.

By Mary McCauley, REALTOR® · Last reviewed September 19, 2026

When someone tells me a condo association has “good reserves,” my next question is: good compared with what? The useful answer connects the budget, the money already saved and the work the buildings will need.

What Fannie Mae announced

For Full Review loan applications dated on or after January 4, 2027, Fannie Mae raises the minimum annual replacement-reserve allocation from 10% to 15% of annual budgeted assessment income. This is a mortgage project-eligibility standard, not a Massachusetts or New Hampshire law imposing one cash balance on every association.

The same letter retired Limited Review for applications dated on or after August 3, 2026, with Full Review or an applicable project-review waiver taking its place. Have the lender identify the review path for your loan.

Source: Fannie Mae: Lender Letter LL-2026-03, March 18, 2026 (page 3)

A simple example

Assume the lender confirms that the association’s eligible annual assessment-income base is $240,000. A 15% allocation is $36,000 a year; a 10% allocation is $24,000. The difference is $12,000 annually.

For an illustrative 20-unit association with equal allocation shares, that difference works out to $50 per unit per month. Actual fees depend on the documents, allocation percentages and the board’s full budget. This example is not a prediction of anyone’s fee increase.

The calculation is annual reserve contribution divided by the applicable annual assessment-income base. It does not mean 15% of the property’s value or 15% of the replacement cost must sit in the bank.

Source: Fannie Mae: Full Review Process and replacement reserve studies

Why a reserve study still matters

The Full Review guide permits an acceptable reserve-study alternative subject to its conditions. The independent study or update must have been completed within three years of the lender’s project approval and meet the guide’s content and qualification requirements. The study and lender analysis must demonstrate adequate funding; the budget must use the highest recommended reserve allocation. A baseline approach allowing cash to approach zero cannot substitute for the percentage test.

The guide also specifies possible income exclusions. Ask your lender to identify the actual denominator rather than applying 15% to whichever total appears at the bottom of the budget.

Source: Fannie Mae: Full Review Process and replacement reserve studies

Why buyers, owners and sellers should care

For a buyer, project eligibility can affect whether the planned financing works. Give the lender the budget and association documents early, alongside your personal loan information.

If you already own a unit, ask how the board’s capital plan and reserve contributions fit together. A budget change may affect future dues or assessment discussions, but the rule alone does not predict your bill.

If you are selling, gather the budget, reserve information and any study before a buyer’s lender asks. Unresolved project questions can complicate financing and timing. This does not mean every condo will become ineligible.

Lending standards and state law are different

Fannie Mae and Freddie Mac set separate mortgage purchase and project-eligibility standards. They are not state condominium statutes. The January 4, 2027 calculation explained here is Fannie Mae’s Full Review requirement.

Freddie Mac publishes its own changes in Guide Bulletin 2026-C. Have the lender confirm which agency, project-review path and effective dates govern your loan; do not assume every Fannie Mae detail applies unchanged to Freddie Mac. Association obligations under state law and recorded documents still require their own review.

Source: Freddie Mac: Guide Bulletin 2026-C, March 18, 2026

Three numbers I would put side by side

A percentage is one checkpoint. A roof replacement does not become affordable just because the budget passes that checkpoint. Compare the contribution with the capital plan, study assumptions and any assessment or borrowing discussions.

What is already saved in replacement reserves?
What will this year’s budget add to those reserves?
What major work is expected, when, and at what estimated cost?

What to ask now

Which review path applies to this property and loan application date?
Does the proposed 2027 budget meet that path, or will a compliant reserve study support an alternative?
Are major repairs, assessments, insurance issues or litigation affecting project eligibility?
What additional documents does underwriting need before the financing deadline?

Sources and review notes

This is an educational guide, not a property-specific legal, financing, insurance or engineering opinion. Requirements and project status can change. Confirm the current records and applicable terms for your transaction.