Fannie Mae's New 15% Reserve Rule: What Florida Condo Boards Need to Budget for in 2027
First of two articles on the 2027 reserve rules. Part 2 looks at what Florida’s own reserve requirements mean for your budget.
1. Introduction
The budget your board adopts this fall is the one a lender will measure in January.
On January 4, 2027, Fannie Mae raises the amount your association must allocate to replacement reserves from 10% to 15% of annual budgeted assessment income. Freddie Mac has made the same change. The two announced together in March 2026, coordinated with their federal regulator, so this is not a policy one lender will read differently from another.
Most Florida boards are working on 2027 budgets right now. Yours is the document a lender will pull when the first buyer in your building applies for a mortgage next year.
2. What changed, and when
Three dates matter, and each is keyed to the date a lender takes a loan application, not to anything your association does. Two of them have already passed.
July 1, 2026. Master policy requirements tightened. The per-unit deductible on your property policy is capped at $50,000 per unit, across all required property insurance perils.
August 3, 2026. Limited Review was eliminated.
When a buyer applies for a Fannie Mae mortgage on a condo unit, the lender has to check the building as well as the buyer. Until August, there were three ways to do that:
- Limited Review: a light-touch check, available when the buyer was putting down a larger deposit. The lender did not look at your budget or reserves. Florida buyers needed a bigger deposit than buyers elsewhere to qualify, but the option was there.
- Full Review: the lender goes through the association’s budget, reserves, insurance and condo questionnaire.
- Waiver of Project Review: no building review at all. This is available only in narrow cases, mainly very small buildings.
With Limited Review gone, almost every sale or refinance financed through Fannie Mae or Freddie Mac in a typical Florida building now goes through Full Review. That means a lender will read your budget, and it’s at Full Review that the 15% reserve test below applies.
January 4, 2027. Replacement reserves rise from 10% to 15% of annual budgeted assessment income, under Full Review.
Three more changes took effect straight away, when Fannie Mae made the announcement in March 2026:
- Roof insurance: Your master policy still has to cover the roof, but Fannie Mae no longer requires that coverage to be at full replacement cost. The announcement doesn’t say what other basis it will accept, so talk to your insurance agent before changing the policy.
- New Florida buildings: Until now, a new or newly converted Florida condo building with attached units needed Fannie Mae’s own approval before buyers there could get a Fannie Mae mortgage. That extra step is gone. These buildings are now reviewed the same way as buildings anywhere else, which removes the last Florida-only restriction.
- Small buildings: A new or existing building with ten or fewer units can now skip the building review entirely (a Waiver of Project Review). For buildings of five to ten units, this applies only if the building is not part of a master association or larger development. Where the waiver is used, the lender doesn’t apply the reserve test in this article.
3. Two ways to meet the reserve requirement
There are two routes, and you only need one of them.
The first is the percentage. Allocate at least 15% of your annual assessment income to replacement reserves.
The second is a reserve study. If your association has a reserve study completed within three years of the date a lender approves the building, and the budget funds reserves at the study’s highest recommended level, the percentage test does not apply.
That second route is the one most boards will reach for, because 15% of assessment income is a large number for a building with modest common elements. It is also the route that changed most on August 3.
4. “We have a reserve study” is no longer the easy answer
Two conditions apply to using a study instead of the percentage — one long-standing, one new since August 3.
The study has to be current. This rule is not new. Fannie Mae allows a study completed within three years of the date the lender approves the building. The clock runs to that approval, not to your budget — so a study you are still quoting at budget meetings several years on will not carry you.
The funding method matters — this is the new part. Baseline funding — the method that lets the reserve balance approach zero without going below it — is no longer accepted. Where a study offers several funding scenarios, your budget has to reflect the highest recommended allocation, not the cheapest one your board could defend.
So your association can hold a genuine, professionally prepared reserve study and still fail, because it is funding to the wrong line in that study. This is worth checking before you assume the second route is open to you.
5. What failing actually costs
There is no fine and no regulator to answer to. The consequence is quieter and worse.
If a lender reviews your building and the reserves fall short, loans there get harder to place. Buyers walk, or come back with cash-only offers at lower numbers. Sellers find out at the closing table. Owners who have never attended a board meeting discover that a budget decision made in October cost them real money on resale.
6. What to check before you adopt the 2027 budget
Four things, and none of them require a consultant:
- Work out 15% of your budgeted assessment income for 2027, and compare it to what the draft budget actually allocates to reserves.
- Find the date your reserve study was completed or last updated. If it will be more than three years old when a lender next looks at your building, that route is closing.
- Identify which funding scenario in the study your budget is following, and whether it is the highest one.
- Confirm your master policy deductible is within the $50,000 per-unit cap.
7. Where this usually gets difficult
Most of the work above is arithmetic against your own books. The difficulty is usually not the rule — it is that the reserve line in the budget and the reserve accounts in the ledger do not line up well enough to answer the question quickly.
One thing this article deliberately leaves out is Florida’s own reserve rules. Your structural integrity reserve study (SIRS) is a separate requirement under state law, and satisfying it does not satisfy this test. Part 2 looks at what budgeting for both means in practice, and how Florida’s reserve pause provisions show up in the numbers a lender reads.
Download our free Financial Self-Audit Checklist from the Resources page to help you evaluate how well your association controls its finances.
If you have questions about your association’s financial situation, email us at info@outsideaccounting.com.
Written by Outside Accounting — specialists in financial management for Florida condominium and HOA boards. We provide clear, practical guidance to help boards stay compliant and make informed financial decisions.
Disclaimer: This article is provided for educational purposes only and does not constitute tax, legal, or lending advice. Condominium association boards should consult their licensed CPA, tax professional, reserve study provider, or legal counsel regarding their specific circumstances and compliance obligations.
