On March 18, 2026, Fannie Mae issued Lender Letter LL-2026-03, revising project standards and insurance requirements to promote the financial health of condominium projects and promote long-term sustainable homeownership. Some highlights:

  • Investor concentration limits are being retired. Previously, the investor concentration limit in established projects was 50%.
  • Lenders previously were able to obtain reserve studies to show that a project was adequately funded when it was not budgeting for replacement reserves in compliance with Fannie Mae requirements. Now, when lenders obtain these reserve studies, they must verify that the project’s budget includes the highest recommended reserve allocation amount in the reserve study to cover the identified costs.
  • Replacement reserves were previously required to be a minimum of 10% of annual budgeted income. These are now required to be a minimum of 15% of annual budgeted income.
  • Master insurance policies are no longer required to insure roofs on a replacement cost basis (they must still be insured). The master policy need no longer include inflation guard coverage. And, the process to document the replacement cost value to verify master policy coverage amounts is being revised completely.
  • The maximum allowable per-unit deductible for property insurance will now be $50,000.

Bear in mind that these changes are for Fannie Mae mortgages, and the requirements of CCIOA must also be followed (in particular, the requirement to insure condominium roofs on a replacement cost basis, less applicable deductibles). This blog does not attempt to address all changes to Fannie Mae’s prior guidelines; contact a WLPP Law attorney to discuss further.

These changes may help facilitate more available funding for communities that have found themselves with hard-to-sell units due to prior reserve requirements or the insurance market, but they may also make budgets tighter as communities struggle to increase their reserve contributions. We’ll keep you updated as our communities continue to face ever-evolving conditions.