New lending requirements tied to condominium projects are shifting how communities must approach reserves, maintenance, and insurance. These changes aren’t minor tweaks — they will directly affect association budgets, financing approvals, and long-term capital planning.
Key Changes Boards Should Be Aware Of
Reserve Funding Requirements Are Increasing
- Minimum reserve contributions are increasing from 10% to 15% of the annual operating budget (effective in upcoming lending cycles).
- If your community uses a professional reserve study and its annual contribution to the reserve fund is less than 15% of the annual operating budget:
- Associations must fund at the highest recommended funding level.
- The use of “baseline” funding plans will no longer be accepted unless the annual contribution is a minimum of 15% or higher of the annual operating budget.
This means many communities will need to increase annual contributions to meet lending eligibility.
Stricter Project Review Process
The traditional “Limited Review” option is being phased out.
Most condominium projects will require:
- A Full Project Review, or
- A Waiver of Project Review (available only to certain qualifying communities).
Lenders will expect more detailed documentation and deeper evaluation of financial health and building condition.
Insurance & Deductible Updates
To address market conditions and rising insurance costs:
- Deductibles of up to $50,000 per unit may now be permitted.
- Roofs may no longer need to be insured at full replacement cost under certain conditions.
While this can reduce insurance costs, it may also increase exposure for individual owners and require careful risk management.
What This Means for Associations
These changes will likely result in:
- Higher reserve contributions and budget adjustments
- Increased scrutiny of reserve studies and capital plans
- Greater emphasis on proactive building maintenance
- More documentation required during refinancing or unit sales
How Falcon Can Help
Falcon supports condominium communities through every stage of this transition:
- Capital Reserve & SIRS Planning
- Aligns funding plans with updated lending expectations
- Helps boards make informed decisions about contributions and timing
- Building Condition Assessments
- Identifies deferred maintenance that could impact lending eligibility
- Helps prioritize repairs before they become financial or safety risks
- Capital Planning & Project Consulting
- Assists in developing realistic, phased improvement plans
- Balances financial constraints with long-term building performance
- Insurance & Risk Coordination
- Provides technical insight that supports insurance evaluations and lender requirements
Planning Ahead Matters
With implementation timelines approaching, associations should be proactive now:
- Review or update reserve studies
- Assess current funding levels
- Evaluate upcoming capital needs
- Confirm insurance and risk exposure
For more information, click here: https://singlefamily.fanniemae.com/news-events/lender-letter-ll-2026-03-updates-project-standards-property-insurance-requirements
