Here is a scenario we see more often than any Board expects. A unit goes under contract. The buyer is qualified, the price is right, and everyone is planning for closing. Then the lender sends the association a questionnaire, does not like what comes back, and the deal dies. Not because of the buyer. Because of the association.
That is what it looks like when a condominium loses its warrantable status, and the rules that determine warrantability just changed in a big way. On March 18, 2026, Fannie Mae issued Lender Letter LL-2026-03, with Freddie Mac following in a corresponding bulletin. Together they represent the most significant update to condominium lending standards since the post-Surfside changes began in late 2021. Some provisions took effect immediately. The rest phase in through 2026, with the largest arriving in January 2027.
If you serve on a condo Board in Washington DC, Maryland, or Virginia, these changes will touch your budget, your insurance program, and every sale and refinance in your community.
Why a Mortgage Agency Your Board Never Talks to Controls Your Property Values
Fannie Mae and Freddie Mac do not lend money directly. They purchase mortgages from lenders after closing, which means lenders only write loans that meet their standards. Those standards effectively govern the majority of conventional residential mortgages in the country.
The part that matters for your Board: these agencies do not just evaluate the borrower. They evaluate the entire condominium project. Your association's budget, reserves, insurance, delinquency rate, litigation exposure, and deferred maintenance all get reviewed. A project that passes is called warrantable. A project that fails is non-warrantable, and buyers in a non-warrantable project face larger down payments, higher interest rates, and a much smaller pool of willing lenders.
When that happens, sellers cut prices to attract cash buyers, appraisals drift down, and every owner in the association absorbs the loss. And because cash sales tend to go to investors, each one tips the community toward more investor-owned units and away from owner-occupants. A Board that ignores lending eligibility is making a property value decision whether it intends to or not.
The stakes are not hypothetical. In a survey of more than 700 board members, managers, and business partners, CAI's Foundation for Community Association Research found that 42 percent of respondents were unsure whether their community was even eligible for federally backed financing, and 40 percent acknowledged characteristics that could trigger ineligibility. Among communities already deemed ineligible, 64 percent reported that the denial had negatively impacted home sales or property values.
What Changed in March 2026, Date by Date
The full lender letter runs long and was written for mortgage professionals. Here is the plain-language version, organized by the date each change hits.
July 1, 2026: A $50,000 Cap on Per-Unit Master Policy Deductibles
Master property insurance policies may not carry a per-unit deductible above $50,000, and this cap is already in effect. Associations that raised deductibles aggressively over the past few years to control premium costs need to confirm their current position immediately. If your deductible structure exceeds the cap, your entire community can fall out of compliance at your next renewal, and every pending sale in the community inherits that problem.
August 3, 2026: The End of Limited Review
For loan applications dated on or after August 3, 2026, the streamlined Limited Review process is eliminated for established projects with more than 10 units. Limited Review was the short path: for qualifying transactions with larger down payments, the lender confirmed the project's insurance and a few basics and went no further. Every conventional loan in those communities now goes through Full Review.
Full Review means the lender examines the association's budget, reserve funding level, insurance certificates, delinquency data, pending litigation, special assessments, and any structural or mechanical inspection reports from the past three years. Under the standards in effect since 2023, if such an inspection report exists, the lender must obtain and review it.
For boards, the practical effect is simple: the documentation bar that used to apply to some transactions now applies to all of them. Associations with thin records, outdated budgets, or unresolved inspection findings will feel this first.
January 4, 2027: Minimum Reserve Funding Rises From 10 Percent to 15 Percent
This is the change with the largest budget impact. For loan applications dated on or after January 4, 2027, the minimum reserve contribution rises from 10 percent to 15 percent of total annual budgeted assessment income.
Run the numbers for your own community. An association collecting $500,000 a year in assessments must direct at least $75,000 to reserves, up from $50,000. That $25,000 difference has to come from somewhere: an assessment increase, an operating cut, or both.
There is one way out of the 15 percent formula, and it is worth pursuing. If your association has a reserve study completed or updated within the last three years and funds reserves at the highest level recommended in that study, the percentage floor does not apply. A current reserve study is now the single most valuable financial document your association can hold. As with any lending standard, individual lenders decide how they apply it, so confirm your community's position with your lender contacts or counsel before making major budget moves. We cover the reserve study requirements for DC, Maryland, and Virginia associations in a separate guide; the short version is that DC has no statutory study requirement, while Maryland and Virginia both require one at least every five years.
One more detail buried in this provision: the baseline funding method, which targets a reserve balance near zero, is no longer permitted under any circumstances. Maryland associations should note that state law still lists baseline funding as an option for the state-mandated funding plan. Satisfying Maryland law and satisfying Fannie Mae are now two different questions. Your Board needs to answer both.
Changes That Help: Insurance Relief and Broader Waivers
Not everything in the lender letter adds burden. Several provisions reverse requirements that boards have been fighting for years.
Roofs may now be insured on an actual cash value basis rather than full replacement cost, reversing a 2024 requirement that drove premiums up sharply for older buildings. The inflation guard requirement is eliminated. The project review waiver now covers communities with 10 or fewer units, up from four, provided the smaller five-to-ten-unit projects are not part of a master association. And the 50 percent investor concentration limit is gone entirely, which improves financing access in communities with significant rental populations. That last change matters in the District, where investor-owned units are common in many established buildings.
What This Means for the DC Metro Market Specifically
Washington DC is condominium and co-op territory. A large share of the region's association-governed housing stock is in buildings that are decades old, which is exactly the profile these standards were written to scrutinize. Older buildings carry older roofs, older mechanical systems, and larger capital replacement obligations, so the reserve math bites harder here than in newer suburban markets.
Two regional notes. First, housing cooperatives are evaluated under separate co-op project standards, but the direction of travel is the same: documented reserves, current studies, and clean records. DC co-op boards should not assume these changes are someone else's problem. Second, Maryland and Virginia boards are already carrying new state-level reserve and disclosure obligations from the 2025 legislative sessions. The federal lending standards now stack on top of those. Compliance is no longer one list. It is two, and they do not perfectly overlap.
The Board Action Plan, In Order
Right away:
- Pull your master insurance policy and confirm the per-unit deductible position against the $50,000 cap, which took effect July 1, 2026. Better yet, have your insurance agent review the full policy against the new standards at the same time.
- Confirm what percentage of budgeted assessment income currently goes to reserves. Go to the financials directly and get the actual number, not an impression.
- If your reserve study is more than three years old or does not exist, commission one now. Reserve specialists book out months in advance, and demand is about to spike.
- Organize the documents Full Review will request: current budget, balance sheet, insurance certificates, delinquency report, litigation disclosure, and any inspection reports.
Between now and January 2027:
- If reserves are below 15 percent of assessment income and you lack a qualifying study, build the increase into the fiscal 2027 budget rather than discovering the gap mid-year.
- If you have a current study, confirm you are funding at the highest recommended level in it, not a partial level.
- Put lending eligibility on the agenda as a standing quarterly item. Warrantability is not a one-time certification. It is a status you keep or lose.
At EJF, we handle lender questionnaires directly for the communities we manage, and we flag reserve and insurance gaps against the new standards before they show up in a failed transaction. If your current management company has not briefed your Board on LL-2026-03 yet, that silence is informative.
How to Find Out Where Your Association Stands Today
One of the standing frustrations in this system, and one CAI has formally raised with federal regulators, is that associations cannot directly look up their own eligibility status. Fannie Mae and Freddie Mac maintain internal project databases that lenders can query, but boards and managers do not get direct access. That means your association can be flagged as ineligible and the Board finds out the way it always finds out: a transaction fails.
You are not helpless, though. There are three practical ways to build your own picture.
First, ask your management company for a log of every lender questionnaire completed for your community in the past twelve months. The questionnaires themselves tell you what lenders are probing: reserve percentages, deferred maintenance, special assessments, litigation. If the same question keeps generating an awkward answer, that is your association's weak point.
Second, ask a local lender or two. Loan officers who work your neighborhood often know which communities are flagged, because they run into the flags on every deal. Real estate agents active in your community hear it even earlier. If units in your community are selling disproportionately to cash buyers, that is not a coincidence. It is a symptom.
Third, check your own numbers against the published standards, which are public: reserve contribution as a share of budgeted assessment income, the per-unit deductible, whether delinquencies sit above or below 15 percent, and any special assessment or litigation disclosures. The gap analysis takes an afternoon, and it is exactly the review we run for EJF-managed communities every budget season.
Frequently Asked Questions
What is a warrantable condo?
A warrantable condo is a unit in a project that meets Fannie Mae or Freddie Mac eligibility standards, allowing buyers to use conventional financing on standard terms. Warrantability depends on the association's finances, insurance, reserves, litigation exposure, and physical condition, not on the buyer.
Do the new rules apply to HOAs with single-family homes and townhouses?
Mostly no. The project review framework applies to condominiums and, under separate standards, housing cooperatives. Detached single-family HOA communities are generally not subject to project review. Attached townhouse communities organized as condominiums are covered, so check how your community is legally structured, not what it looks like from the street.
Our reserves are below 15 percent. Are sales in our community going to stop in 2027?
Not automatically, but loans will get harder. A current reserve study with funding at its highest recommended level exempts you from the percentage test. Without one, lenders can be expected to apply the 15 percent floor to loan applications dated on or after January 4, 2027, and applications in under-funded communities are likely to be declined or pushed to non-conventional products. How strictly each lender reads the standard varies, which is one more reason to know your numbers before a contract is on the line.
Who is responsible for completing the lender questionnaire?
Typically the management company, acting on the association's behalf. Answers carry liability, so accuracy matters more than speed. In the CAI survey, 64 percent of community association professionals cited liability concerns around lender questionnaires. Boards should know who answers these in their community and what is being represented.
Does FHA approval cover us for these changes?
No. FHA runs its own condominium approval process with its own standards and its own approved-project list, separate from Fannie Mae and Freddie Mac. A project can be FHA approved and still fail conventional project review, or the reverse. Boards in communities with significant FHA buyer traffic should track both frameworks, because losing either one shrinks your buyer pool.
Will these changes raise our condo fees?
For many communities, yes, at least modestly. The 15 percent reserve floor is the main driver. The insurance changes cut the other way, since actual cash value roof coverage and the elimination of inflation guard should reduce premiums for many communities. The net effect depends on your community's current reserve position and insurance program.
EJF Real Estate Services has managed condominiums, cooperatives, HOAs, and townhome communities across Washington DC, Maryland, and Virginia since 1996. We manage more than 650 communities and work with lenders, reserve specialists, and insurance brokers on exactly these requirements every week. If your Board wants a clear read on where your community stands under the new standards, request a proposal at ejfrealestate.com/request-proposal or call 202-537-1801.
