Condominium owners already face rising insurance costs, maintenance expenses, and association assessments, as discussed in our earlier article, Why Are HOA and Condo Assessments Going Up?. Now, new condominium lending rules taking effect January 4, 2027, could add to those costs and make some units harder to sell or refinance.
According to a recent CNN article, condominium prices are falling in many markets, even as ownership costs continue to rise. The new rules include stricter condominium reserve requirements that could put additional pressure on association budgets.
What Changes January 4?
Fannie Mae and Freddie Mac, which play a major role in the mortgage market, will generally increase the minimum annual contribution to condominium replacement reserves from 10% to 15% of annual budgeted assessment income for projects subject to their lending reviews.
Reserves pay for major future expenses, such as roofs, elevators, paving, and other common elements.
For example, an association with $500,000 in annual assessment income that previously budgeted $50,000 for reserves may need to increase that amount to $75,000. That is an additional $25,000 each year.
Associations may also qualify through a reserve study that meets the lending requirements, although those standards have become stricter.
The changes are explained in Fannie Mae’s official Lender Letter LL-2026-03.
Will Condominium Assessments Increase?
Possibly. These are mortgage lending requirements, not new state laws requiring associations to increase assessments. However, associations that do not meet the standards may find that buyers will not be able to obtain certain mortgages to purchase units.
That could make units harder to sell and affect property values.
Other lending changes took effect in August 2026, requiring more condominium projects to undergo detailed reviews of their finances, insurance, and building conditions. Some smaller projects and other qualifying communities may be exempt from certain requirements. For more information about the earlier lending changes, including new review and insurance requirements, see our previous article, Fannie Mae Issues Updates to Project Standards and Property Insurance Requirements.
Why Are These Changes Being Made?
The 2021 collapse of the Champlain Towers South condominium building in Surfside, Florida, brought national attention to aging buildings, deferred maintenance, and inadequate reserves.
The goal is to encourage associations to plan for major repairs rather than delay maintenance or rely on large special assessments. However, setting aside more money now can create financial challenges for owners already struggling with rising costs.
The Community Associations Institute (CAI) and mortgage industry groups have raised concerns that the changes could make condominium ownership less affordable and financing more difficult.
What Should Boards and Owners Do?
Boards preparing their 2027 budgets should review their reserve contributions and determine whether the new lending requirements apply. They should also consider whether an updated reserve study is needed.
Owners should understand that even if they have no plans to sell, these changes could affect their monthly assessments. Those planning to sell or refinance should recognize that an association’s financial condition may affect mortgage availability.
Takeaway: Beginning January 2027, condominium association finances will become even more important to mortgage lenders. Boards should review their budgets now, and owners should understand that reserve funding can affect both their monthly expenses and the future marketability of their homes.
For questions about HOA or condominium matters, contact a community association attorney at one of Law Firm Carolinas’ North or South Carolina offices.