Fannie Mae is at it again, continuing to make changes to condominium requirements. The latest lender letter, LL-2026-03, dated March 18, 2026, brings some good, some bad and some ugly.
The letter can be found at file:///H:/Superior%20Funding/Knowledge%20Base/Condos/FNMA_LL-2026-03%20Project%20Standards_Insurance%2003-18-26.pdf
Here is our summary.
The Good
Project review waiver, previously available only to 2 to 4-unit condos, is being expanded to include condos with up to 10 units. This is huge, as it will allow many more condominiums to be approved without extensive condo questionnaires and often difficult safety determinations.
Also, the 50% max investor concentration limit, previously applicable to condominiums reviewed under Full Review standards when financing a unit as non-owner occupied is being recalled.
The Bad
Limited review process for condominium approvals is being eliminated completely. This means the condominiums over 10 units will always be going through the more extensive Full Review approval process, which includes budget review and certain additional master insurance coverage requirements, such as Fidelity.
The Ugly
Replacement Reserve allocation requirement is being raised from 10% to 15%. With Limited Review process which did not require budget review gone, all condominiums with more than 10 units will have to increase allocation to reserves, which will certainly lead to increase in condo fees. However, Fannie Mae set a generous deadline of January 4, 2027 for this specific requirement, allowing condominium associations to work through this.
Almost certainly not all associations will catch on to this, and certain condominiums will no longer be meeting the standards for conventional conforming financing. This will leave some prospective buyers with less choices and some prospective sellers with harder time selling.
As very often is the case with Fannie Mae, a mixed bag of news.
Roman Shulman
Superior Funding Corporation