Fannie Mae's Lender Letter LL-2026-03 and updated Selling Guide outline new reserve study and replacement reserve requirements for condominium projects. The Falcon Group continually monitors policy changes to deliver reserve study solutions that meet current lender standards.
Replacement Reserve Increases
Before the current update, lenders could sometimes use a reserve study (a long-term funding plan for property maintenance and repairs) as proof of sufficient reserves if a project’s budget didn’t meet replacement reserve standards, subject to Fannie Mae’s specific criteria. Now, when lenders use a reserve study instead of standard budgeting, the project’s budget must reflect the highest recommended allocation in the study, as required by Fannie Mae.
Lenders can no longer use the baseline funding method. This approach, which allowed reserve balances to approach zero, is no longer permitted for meeting reserve requirements.
Lenders must adopt this new policy for all loan applications effective August 3, 2026. However, lenders are also encouraged to implement these new changes immediately.
Understanding Enhanced Reserve Study Requirements
Previously, the minimum allocation for capital expenditures and deferred maintenance was 10% of the annual budgeted income. This is now 15%. All other budget adequacy and replacement reserve requirements remain unchanged as of June 2026.
Lenders must follow this 15% allocation requirement when using the “Full Review” for any loan applications starting January 4, 2027. Fannie Mae has announced it expects to update Certifications for Condominium Project Manager (CPM) lenders based on these changes.
What This Means for You
If you manage a condo, the Fannie Mae changes mean that projects that may have previously qualified for a “Limited Review” will now be subject to a more detailed review. Make sure your reserve studies, financial records, and project documents are current and organized. Even if it hasn’t been three years since your last reserve study, proactively updating now may help ensure compliance with the latest standards.
An up-to-date reserve study and condo budget are now crucial. Now is the time to proactively review your current reserve studies and funding plans. Depending on what you find, you may need to adjust assessments to increase reserve contributions. Maintaining compliance is important both to meet Fannie Mae’s current eligibility standards and ensure your condo remains marketable to a range of buyers.
How The Falcon Group Supports You
The Fannie Mae changes can impact condo project eligibility. Condos must follow expert recommendations and adopt a more proactive approach to future repairs.
The Falcon Group stays up to date on reserve study requirements so we can continue to provide high-quality reserve studies that reflect your association’s specific needs. With over 5,000 capital reserve studies completed, we deliver compliant, accurate solutions that ensure you meet Fannie Mae’s requirements.
Our engineering and architectural services assess property conditions, identify capital needs and provide reserve recommendations aligned with the new 15% threshold. We offer building envelope inspections, structural assessments and Mechanical, Electrical, Plumbing (MEP) evaluations for a complete picture of deferred maintenance.
Contact Us for Expert Capital Reserve Studies
With changes from Fannie Mae, long-term planning is more important than ever before. The Falcon Group helps condominium managers and owners make informed, compliant decisions. Contact us today for a reserve study consultation.
