What You Need to Know Now That Limited Review Has Retired
Fannie Mae Lender Letter LL-2026-03 | Freddie Mac Bulletin 2026-C
Presented by John Aguirre | Opus Dei Mortgage | August 3, 2026
Two Changes Are Reshaping Condo Approvals
Limited Review Retires — Effective August 3, 2026
Every condo purchase and refinance now moves to Full Review.
Streamlined approval for established, low-risk projects is gone — regardless of the project's track record.
We used to be able to skirt around showing certain items to the lenders if clients could meet up the down payment to get a limited review. Not anymore!
Reserve Funding Requirement Rises — Effective January 4, 2027
The minimum HOA reserve funding climbs from 10% to 15% of the annual budget, layered on top of existing state-level reserve laws already in place.
This is a big one. see example of how to do the math
Key Dates on the Calendar
March 18, 2026
LL-2026-03 issued by Fannie Mae — the rule is set in motion
August 3, 2026 — Today
Limited Review retires. Full Review is now the standard for every condo file
January 4, 2027
Reserve minimum rises to 15% — industry groups including NAMB continue pressing FHFA for a delay
What This Means for Your Deals
Deeper Documentation
Expect full HOA document requests, budget analysis, and insurance verification on files that once qualified for a streamlined path.
Eligibility Risk
Sound, long-standing associations may be pushed into non-warrantable status under Full Review's stricter standards.
Longer Timelines
Condo closings need extra buffer — especially files already in process when today's cutover hit.
Costs Shift to Buyers
HOAs racing to meet reserve thresholds may raise dues or levy special assessments, changing qualifying numbers late in the process.
More Changes Baked Into LL-2026-03
Small-Building Waiver Expanded
Projects of 5–10 units qualify for Waiver of Project Review if not part of a master association — less HOA documentation required.
Investor Concentration Cap Retired
The 50% investor-owned cap blocking many high-rise buildings is gone under Full Review. Presale rules for new projects still apply.
Insurance Relief for HOAs
Roofs no longer require replacement-cost coverage. The inflation guard requirement on master policies is retired.
Florida PERS Submission Retired
New Florida attached-unit projects move to lender-delegated Full Review instead of a separate Fannie Mae PERS submission.
Two More Items for Your Due-Diligence Checklist
Reserve Studies Must Hit the Highest Funding Level
Effective August 3, 2026
When a lender relies on a reserve study to qualify a project, it must now recommend the highest funding level. Baseline funding — the option that lets the reserve balance approach zero — no longer qualifies.
Master Policy Deductibles Capped at $50,000 Per Unit
Effective July 1, 2026
When a master policy carries a per-unit deductible above $50,000, the individual unit owner must hold their own HO-6 policy to cover it — capped at the greater of 5% of coverage or $2,500.
How the 15% Reserve Test Actually Works
The Ratio
Reserve Contribution ÷ Assessment Income — but certain income can be excluded from the denominator.
Excludable Items
- Incidental income
- Utility income owners normally pay themselves (water, cable, internet)
- Special assessment income
- Master association assessments
Same $150K reserve contribution — applying $200K in excluded income flips the ratio from 13.6% (fail) to 16.7% (pass).
The Data Gap: FHFA's Projection vs. Reality
FHFA Projected
- Fewer than 10,000 associations affected
- Dues increases of just $15–$30 per unit
NAMB's Independent Findings
Analysis of 100,000+ reserve studies tells a very different story:
- 62–74% of associations are already underfunded
- Real-world compliance costs of $42–$750 per unit per month
- Special assessments reaching $1.35 million per unit in severe cases
NAMB's high-end finding is 25× greater than FHFA's projected maximum monthly cost per unit.
Buyers Are Already Feeling the Uncertainty
Unsure of Eligibility
Of community associations were unsure whether they even qualified for federally backed financing.
Sales Already Hurt
Of associations already deemed ineligible said it hurt home sales or property values.
Source: Community Associations Institute, 2025 survey, cited by NAMB
The Impact Isn't Even Across States
Florida
- ~1/5 of all U.S. condo units
- 50% more weakly funded associations than any other state
- Condo prices already down 10.8%
- 1,400+ associations on Fannie Mae's unavailable list
Nevada
- 65%+ of residential listings within HOA communities
- Condo inventory up 77% while sales are down 15.4% YoY
- Some associations funded as low as 42%
Industry Pushback: The Case for a Delay
NAMB's formal letter to FHFA Director William Pulte asks for:
12-Month Transition Period
On Limited Review retirement and a delay of the reserve increase — giving the industry time to adapt.
Preserved Streamlined Pathway
A maintained streamlined review option for established, low-risk projects with proven track records.
Single Consolidated Compliance Date
One unified implementation date instead of a confusing rolling timeline of multiple effective dates.
Stakeholder Feedback Channel
A formal process for industry input before final implementation takes effect.
How to Prepare Your Buyers and Sellers
Request HOA Documents Early
Ask for the HOA questionnaire, current budget, and reserve study before writing an offer.
Check the Reserve Study Date
Confirm it's no more than 3 years old and uses the highest funding level.
Ask About Assessments
Find out if any special assessment or dues increase is planned before it affects qualifying numbers.
Check Eligibility History
See if the building has ever appeared on Fannie Mae's ineligible or unavailable list.
Build in Extra Time — Loop In Your Lender Early
Before the offer is written, not after. Early lender involvement prevents last-minute surprises.
Know the Terminology: Fannie vs. Freddie
Fannie Mae Review Options
- Waiver of Project Review — small/qualifying projects
- Lender-Delegated Full Review — standard path for all others
- FHA Approvals — also accepted
Freddie Mac Review Options
- Exempt From Review — small/qualifying projects
- Full Established Review — standard path
- New Construction Review — for new projects
- Reciprocal Project Reviews — cross-agency acceptance
Both agencies retired their streamlined path — but they use different terminology. Know which applies to each file.
Condo Financing Is Changing