New Fannie Mae Condo Rules: What They Mean for Your Listings and Closings

If you sell condos, co-ops, or units in a planned unit development, Fannie Mae changed the rules on you this year. Lender Letter LL-2026-03 rewrites how these projects get approved for financing. Some of it's already in effect. The rest phases in through January 2027. I work enough condo purchases to know which parts of this actually change how your deals go, and which parts are noise — here's the short version.

Limited Review is retired — this is the one that matters

As of August 3, 2026, the streamlined Limited Review process for established condo projects no longer exists. Nearly every established project you sell now needs a Full Review, unless it's small enough to qualify for the separate Waiver of Project Review (below).

For you, that means more documentation requests from the buyer's lender — a current HOA budget, reserve study, insurance certificate, and litigation disclosures — and a financing timeline that runs a little longer than it did a year ago. It's not a reason to avoid condo listings. It is a reason to have that paperwork ready before you list, not after you're under contract with a financing deadline ticking.

The building types that get it easier

Small associations — 10 units or fewer, not part of a larger master association — can now qualify for an expanded Waiver of Project Review instead of a Full Review. It's a genuinely faster, lighter path. If you list in smaller buildings, this is worth mentioning to buyers directly: it can be a real point in the property's favor.

Reserve funding, and the special assessment conversation

The change most likely to blindside a deal: starting January 4, 2027, condo and HOA reserve funding requirements rise from 10% to 15% of assessment income for projects going through Full Review. Buildings that are underfunded relative to that new floor may need to raise dues or pass a special assessment to comply.

If you're taking a listing in an older or self-managed building, ask the HOA now whether their reserve study meets the new threshold — not when a buyer's lender asks for it three weeks before closing. A special assessment that surfaces mid-contract is one of the more avoidable ways a condo deal falls apart, and it's avoidable precisely because this change was announced months in advance.

Insurance changes worth knowing

Master policies can now carry a per-unit deductible up to $50,000 (effective July 1, 2026), which may mean your buyer needs their own HO-6 policy to cover the gap — worth factoring into affordability conversations before it surprises someone during their option period. Separately, a few insurance requirements eased back in March: roofs no longer need replacement-cost coverage, and the mandatory "inflation guard" on master policies was dropped. Those changes mostly reduce friction rather than add it.

What I'd do differently on your next condo listing

Get the condo questionnaire, current reserve study, and insurance certificate from the HOA before you list, or the moment you take the listing. If it's a small building, ask whether it qualifies for the Waiver of Project Review — that's a detail worth putting in your marketing remarks. And loop your buyer's lender in the day you have an accepted offer, not at the underwriting deadline, so a Full Review risk gets flagged while there's still time to work around it.

We check condo project eligibility before your buyer is locked into a contract deadline — reach out early and we'll tell you what a specific building's documentation looks like before it becomes a problem three weeks before closing. It's the same reason we can still close most files in 21 days: the surprises get caught early, not at the end.

Common questions

Does Limited Review retirement apply to every state?

Yes, nationwide, for applications dated August 3, 2026 and later. Florida had a related, separate transition on manual project review that also wrapped up by that date.

Do co-ops and PUDs get this too?

Yes — the letter covers condos, co-ops, and planned unit developments financed through Fannie Mae.

How do I know if a building already has project approval issues?

Ask your buyer's lender to run it through Fannie Mae's Condo Project Manager (CPM) as early as possible — ideally before your buyer removes their financing contingency.

Should I mention the reserve requirement change to sellers on the board?

Yes, especially in older or self-managed buildings. It's better for a board to hear about a possible special assessment from you in a normal conversation than to have it surface as a financing objection three weeks before closing.

Does this change how jumbo or non-conforming condo loans are underwritten?

No — LL-2026-03 is a Fannie Mae (conventional/conforming) policy change. Jumbo and non-QM condo underwriting follows separate investor guidelines, though a lender will often still want to see the same HOA documents.

---

This summary reflects our reading of Fannie Mae Lender Letter LL-2026-03 as published; it is not exhaustive and does not replace Fannie Mae's official guide. Project eligibility varies by building and is confirmed at the time of application. Rates, terms, and programs are subject to change without notice, and all loans are subject to credit approval.