Fannie Mae's 15% Rule and Florida's SIRS: Budgeting for Both in 2027
Second of two articles on the 2027 reserve rules. Part 1 covers what Fannie Mae’s 15% rule requires.
1. Introduction
The obvious next question is whether Fannie Mae’s rule is a new cost on top of your SIRS.
Mostly, no. Part 1 explained Fannie Mae’s lending rule: for mortgage applications from January 4, 2027, a lender wants to see 15% of your annual assessment income going to reserves, or a reserve study funded at its highest recommended level. Florida’s structural integrity reserve study (SIRS) rules and Fannie Mae’s rule look at the same thing: the reserve line in your budget. They do not create two separate pots of money.
What they do differently is measure that line. Florida works item by item from your study. Fannie Mae works from a percentage of your assessment income, or from the top funding level in a study. That difference is where a budget can pass one rule and fail the other, and it is what this article is about.
2. Does our SIRS funding count toward the 15%?
Yes. Fannie Mae measures what your budget allocates to replacement reserves for capital expenditures and deferred maintenance. The money you set aside for the structural items in your SIRS is exactly that, so it counts, together with whatever you reserve for other items such as painting or paving.
Some buildings that fund their SIRS properly will already be above 15%. The catch is that you cannot assume it. Florida sets your reserve amount from the remaining life and replacement cost of each item in the study. Fannie Mae divides your annual reserve allocation by your annual assessment income. The two calculations start from different places, so the board has to prepare two sets of calculations.
3. Is the baseline plan in our SIRS enough?
Florida: yes. Since July 2025, every SIRS has to include a recommended funding schedule based on a baseline funding plan, one that keeps the reserve cash balance above zero every year. The study may offer other schedules too, and funding at the baseline level meets the state’s minimum.
Fannie Mae: no. Since August 3, 2026, a lender can no longer accept baseline funding when it uses a reserve study instead of the 15% test. Your budget has to fund the study’s highest recommended level.
So a building funding its SIRS on the baseline plan is doing what Florida requires, but has ruled out Fannie Mae’s reserve study route. That leaves the 15% test as its only alternative.
4. Can we pause reserve contributions after our milestone inspection?
Florida: yes, with conditions. If your association completed a milestone inspection in the previous two calendar years, the board can pause or reduce reserve contributions to pay for the repairs the inspection recommended. It needs the approval of a majority of the total voting interests, the pause can cover no more than two consecutive annual budgets, and it is available only for budgets adopted on or before December 31, 2028. Budgets adopted after that date cannot use it. It is not available to developer-controlled associations or to those under owner control for less than a year. Before contributions start again, the association must have a new SIRS performed. The statute makes no exception for a recent one.
Fannie Mae: no, not without failing the reserve test for those years. A pause takes the reserve line to zero, which fails both the 15% test and the study route. A reduction fails if it takes the line below 15% of assessment income or below the study’s highest recommended level.
The pause can still be the right decision. Repairs have to be paid for, and stopping reserve contributions for two years may ease the pressure on owners compared with a large special assessment, though the reserves still have to be rebuilt afterwards. But owners should vote on it knowing the price: for the years of the pause, buyers needing a conventional mortgage in your building will find it harder to get one.
5. Can a loan or special assessment fund our reserves?
Florida: yes. Reserves for SIRS items can be funded by regular assessments, special assessments, a line of credit or a loan. Using a special assessment, line of credit or loan for this purpose needs the approval of a majority of the total voting interests, and the details have to be included in the annual financial statement that goes to owners and prospective buyers.
Fannie Mae: no. Fannie Mae’s test reads the reserve allocation in your annual budget: the annual budgeted reserve allocation divided by annual budgeted assessment income. Money raised outside the budget, through a loan or a one-off special assessment, does not count toward the 15%. A loan or special assessment can still pay for repairs or rebuild reserves. It just cannot replace the regular reserve line in the budget.
There is a second reason to think carefully. A lender reviews every special assessment: what it is for, the original and remaining amounts, and when it will be paid in full. If it pays for critical repairs, those affecting safety, structural soundness or habitability, the building is ineligible for Fannie Mae-backed mortgages until the work is done. The same applies to unfunded repairs costing more than $10,000 per unit that should be done within the next 12 months, unless they are funded by a special assessment or are owners’ own repairs. Fannie Mae does not say how ‘per unit’ is worked out, so ask your lender if you are close to the line.
6. One budget, both tests
Here is how the two rules play out on one budget. The building and its figures are made up, and the numbers are kept round.
A 40-unit building collects $400,000 a year in regular assessments. Its SIRS recommends two funding schedules for the structural items: $48,000 a year on the baseline plan, or $72,000 a year at the study’s highest recommended level. The association also reserves $6,000 a year for other items.
Draft budget: baseline plan. Reserves of $54,000 ($48,000 for SIRS items plus $6,000 for other items).
- Florida: passes. The SIRS items are funded at the baseline level.
- Fannie Mae, 15% test: fails. 15% of $400,000 is $60,000, and the budget reserves $54,000, which is 13.5%.
- Fannie Mae, study route: fails. The budget follows the baseline plan, not the highest recommended level.
Option A: raise reserves to 15%. Reserves of $61,100, an extra $7,100 a year, which raises assessments to $407,100. That is $14.79 per unit per month. Reserves are then 15.0% of assessments, so this passes Florida and Fannie Mae’s 15% test.
Option B: fund the study’s highest level. Reserves of $78,000 ($72,000 plus $6,000), an extra $24,000 a year, which raises assessments to $424,000. That is $50 per unit per month. This passes Florida and Fannie Mae’s study route, provided the study meets Fannie Mae’s requirements, including being less than three years old. It also builds reserves much faster.
Option C: pause for repairs. Reserves of $0 for up to two years. This is allowed by Florida with an owner vote, and fails both Fannie Mae tests in those years.
For this building, the cheapest way to keep units easy to finance is Option A. The board might still choose B because it wants stronger reserves, but it should make that choice knowing A is available.
The 15% target moves as you raise reserves: the extra money comes from owners, so assessment income rises too. That is why Option A needs $61,100, not $60,000.
7. Which number sets your 2027 reserve Budget?
The higher one. Florida’s figure is the legal minimum. Fannie Mae’s, the cheaper of its two routes, is what keeps units in your building easy to finance. Where they differ, the board is choosing between the cheaper budget and the easier sale.
Add these three checks to the four in Part 1 before you adopt the 2027 budget:
- Split the reserve line into SIRS items and other items, and confirm the SIRS items are funded at least at the level your study requires.
- Run the 15% test on the total reserve line. If it falls short, compare the cost of reaching 15% with the cost of funding the study’s highest level, per unit per month.
- If the board is considering a pause, a loan or a special assessment to fund reserves, put the lending consequences in front of owners before they vote on it. Each of these needs owner approval.
The difficulty is rarely the rule itself. It is that the reserve line in the budget and the reserve accounts in the books do not line up well enough to answer these questions quickly.
The foundation is simple: books that are kept up to date and easy to read, with reserve accounts that match the reserve line in your budget, and contributions that actually reach the reserve bank accounts. With books like that, these questions take minutes to answer, not weeks. If you would like to talk through your association’s situation, we are happy to offer a free consultation. Email us at info@outsideaccounting.com.
Download our free Financial Self-Audit Checklist from the Resources page to help you evaluate how well your association controls its finances.
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 for educational purposes only and is not accounting, tax, legal or lending advice. Condominium association boards should consult their licensed CPA, reserve study provider, attorney or lender about their specific circumstances and compliance obligations.
