Fannie Mae’s 15% Reserve Requirement for Condominiums: What Associations Need to Know for 2027

Fannie Mae requires condominium associations to allocate at least 10% of their annual budgeted assessment income to replacement reserves, increasing to 15% starting January 4, 2027. [1, 2]

Key Reserve Requirements

• Current Standard (10%): Associations must currently budget at least 10% of their annual budgeted assessment income (regular HOA/common fees) toward replacement reserves for capital expenditures and deferred maintenance. [1, 2]
• Upcoming Increase (15%): Effective January 4, 2027, this mandatory minimum budget allocation increases to at least 15% for projects undergoing a Full Review. [1, 2]
• Full Review Process: Fannie Mae retired the “Limited Review” process for most established condo projects, meaning more properties must now pass Full Review guidelines, which scrutinize the operating budget and reserve allocations. [1, 2, 3, 4]
• Special Assessments: Special assessments cannot be used to replace or fulfill the mandatory baseline annual budget reserve allocation percentage. [1, 2]

Using a Reserve Study as an Alternative

If an association does not meet the strict percentage contribution in its annual budget, lenders can look at an independent HOA Reserve Study to determine sufficiency: [1]

• The study must be recent (completed within the last 36 months). [1]
• Lenders must rely on the highest recommended reserve funding amount outlined in the study, rather than minimum baseline approaches that allow cash balances to hover near zero. [1, 2, 3]
• Review official standards directly in the Fannie Mae Selling Guide. [1]

Is Your Condominium Association Prepared for the 2027 Reserve Requirement?

Fannie Mae’s increased reserve requirements could affect condominium budgets, assessments, maintenance planning, and owners’ ability to finance their units. Oliveri & Larsen can help condominium associations understand how these changes may affect their governing documents, budgets, reserve planning, and responsibilities. Contact our team to discuss your association’s legal needs. Call 410-295-3000 or contact us online to schedule a consultation.