The Fannie Mae 15% reserve requirement applies to condo loan applications dated on or after January 4, 2027. From that date, a project under full review needs a budget that puts at least 15% of annual assessment income into replacement reserves, up from 10%. Freddie Mac is making the same change on the same date. The one alternative is a reserve study done or updated within the last three years, with the association funding at the study's highest recommended level. Baseline funding does not count.
A contract written this fall with a January loan application will be tested against 15%. A project that clears 10% today can fail in a few months without anything changing at the association. Here is how to run the test on a live file.
The short version
- Fannie Mae and Freddie Mac raise the budget reserve minimum from 10% to 15% for loan applications dated January 4, 2027 or later.
- The math: annual budgeted reserve allocation divided by annual budgeted assessment income.
- The alternative: a reserve study no more than three years old, with the association funding at the highest recommended level. Baseline funding does not qualify.
- Limited Review was retired on August 3, 2026, so more condo files now get the full budget test.
- Projects budgeting between 10% and 15% are the ones to flag now.
What the Fannie Mae 15% reserve requirement actually says
The change came through Fannie Mae Lender Letter LL-2026-03 in March 2026, issued in step with Freddie Mac. The Community Associations Institute's summary states the core of it plainly: both agencies are "increasing the minimum reserve funding requirement from 10% to 15% of the annual budget effective Jan. 4, 2027."
Three details decide whether a given file is affected.
The trigger is the application date. The closing date doesn't decide it. A loan with an application dated January 3 is tested at 10%. A loan with an application dated January 4 is tested at 15%. Files that straddle the holidays deserve a look now, before anyone assumes the old number applies.
The budget test only applies when the project is reviewed. It lives in the full review requirements. Very small projects that qualify for a waiver of project review, which the same lender letter expanded to projects of 10 or fewer units, skip the budget test entirely.
Full review now covers far more files. Before August 3, 2026, many established projects went through Limited Review, which did not include a budget analysis. Fannie Mae retired Limited Review for applications dated on or after that date, and Freddie Mac retired its equivalent Streamlined Review. A condo that sailed through on Limited Review last spring now faces the reserve test, and in January that test gets harder.
How to calculate the reserve percentage from the HOA budget
The formula comes straight from Fannie Mae's full review process: divide the annual budgeted replacement reserve allocation by the association's annual budgeted assessment income. The result has to be at least 15% for applications dated January 4, 2027 or later.
Both numbers come from the association's budget, not from the balance sheet or the reserve study.
The numerator is the reserve contribution line: what the association plans to move into reserves this fiscal year. It is not the reserve balance. A building with a large reserve account can still fail if this year's contribution is thin. Confusing the two is the most common screening mistake.
The denominator is budgeted assessment income, which includes regular common expense fees. The Selling Guide lets certain income be excluded, which can move a borderline project over the line:
- Incidental income the project does not rely on for ongoing operations
- Income for utilities owners use individually, such as cable or internet
- Income already allocated to reserve accounts
- Special assessment income
A hypothetical to show the stakes. An association budgets $400,000 in assessment income and $48,000 in reserve contributions. That is 12%. It passes on a January 2 application and fails on a January 5 application. To reach 15%, the reserve line would need to be $60,000, or the lender would need a qualifying reserve study.
Check which budget you are holding. If the association runs on a calendar fiscal year, the budget it adopts this fall governs January applications, and the 2026 budget in the resale package is the wrong document. For more on how reserves are built and what percent funded means, see our post on reading an HOA reserve fund.
The reserve study exception, and why "highest recommended" is the hard part
A project that budgets under 15% can still qualify if it has a reserve study conducted or updated within the last three years and the association is following the highest recommended level of funding. Baseline funding is not allowed.
Many reserve studies show more than one funding plan. Baseline funding is typically the lowest: it aims only to keep the reserve balance from dropping below zero over the study period. Other plans aim higher, toward a minimum cushion or toward full funding of the components' deteriorated value. The current Selling Guide already bars baseline funding as a way to waive the 10% requirement. Under the 2027 rule, the association has to be following the study's highest recommendation, so a middle plan may not qualify either.
What the file needs, then:
- The study's date, or the date of its last update. Older than three years at the time of review, and the exception is off the table.
- The recommended funding plans, and which one is highest. This is usually in the study's funding summary or cash flow tables.
- The adopted budget's reserve contribution, compared against that highest recommendation. The budget has to match or beat it. Adopting the study doesn't count. The association has to actually fund it.
The practical trap: an association says it "has a reserve study," and everyone treats that as a pass. It isn't one until the budget line matches the study's highest recommended contribution.
What to do on a condo file right now
The underwriter will test this eventually. The question is whether you learn the answer in week one or week five.
Screen at application, not at condo review. Pull the budget as soon as the project is identified. Run the percentage against both 10% and 15%, then note which one applies based on the expected application date.
Get the next budget early. For any file likely to carry a January 2027 application date, ask the management company whether the 2027 budget has been adopted and request a copy. Proposed budgets are worth reading too, because they show whether the board is moving toward 15% or holding at the old line.
Ask for the reserve study with the budget, not after. If the percentage lands between 10% and 15%, the study is the only route to eligibility. Request the funding summary pages along with the study date.
Tell the agent early when a project is borderline. A buyer who learns in week one still has time to consider other loan programs or other units. A buyer who learns in week five often loses the rate lock, the inspection money, or the deal. If the project does fail, the fallback options are the same as for any non-warrantable condo.
Check government loans separately. The 15% change is a Fannie Mae and Freddie Mac rule. FHA and VA run their own condo approval programs, and a project's status under one tells you nothing about the other.
How ClearHOA reads this for you
Upload the HOA budget, the reserve study, or the CC&Rs and bylaws, and ClearHOA returns the reserve picture in plain English in under 90 seconds. It pulls the budgeted reserve contribution and the assessment income so you can see the percentage, identifies the budget year, and reads the reserve study's date and recommended funding plans when you include it. Every figure comes back with a source reference. It runs on any budget, CC&R, bylaws, rules and regulations, or HOA addendum, so you can screen a project before the questionnaire goes out.
Frequently asked questions
When does the Fannie Mae 15% reserve requirement take effect?
It applies to loan applications dated on or after January 4, 2027. Applications dated before then are tested against the current 10% requirement, even if the loan closes after January 4. Files taken in late December and early January need a clear record of the application date.
Does Freddie Mac have the same 15% reserve requirement?
Yes. Fannie Mae and Freddie Mac announced the change together, and both raise the reserve minimum from 10% to 15% for applications on or after January 4, 2027. Both accept a qualifying reserve study as the alternative. Freddie Mac also retired its Streamlined Review when Fannie Mae retired Limited Review, so both agencies now review more condo budgets.
How do you calculate an HOA's reserve percentage?
Divide the budget's annual replacement reserve contribution by its annual budgeted assessment income. Use the budget, not the balance sheet. Fannie Mae allows certain income to be excluded from the denominator, including special assessment income, income already allocated to reserves, income for individually used utilities, and incidental income the association does not rely on for operations.
Can a reserve study replace the 15% requirement?
It can, if the study was conducted or updated within the last three years and the association is funding at the study's highest recommended level. Baseline funding does not qualify. Having a study on file isn't enough. The adopted budget's reserve contribution has to match or beat the highest recommendation for the current year.
What happens if a condo doesn't meet the 15% reserve requirement?
If the budget falls short and there is no qualifying reserve study, the project fails full review. It becomes ineligible for conventional loans sold to Fannie Mae or Freddie Mac. The borrower's qualifications don't change that. Buyers typically turn to portfolio or non-QM lenders, which usually means a larger down payment and a higher rate.
If a condo file is headed for a January application date, run the budget and reserve study through ClearHOA before you order the full review. You will get the reserve contribution, the assessment income, the budget year, and the study's funding plans, each with a source citation from the documents. It reads like an underwriting summary, so you can flag a borderline project in week one instead of week five.