The practical lesson is not that every condominium must immediately change its insurance or budget. It is that boards, managers, lenders, reserve professionals, insurance advisors, and counsel need a shared timeline and accurate project information.
1. Limited Review has been retired for applicable new applications
Established projects that previously qualified for Limited Review must use Full Review or, when applicable, Waiver of Project Review. Fannie Mae required the change for loan applications dated on or after August 3, 2026.
Board impact: Communities should expect more project-level questions and should organize insurance, budget, reserves, ownership, litigation, structural, and maintenance information before a unit is under contract.
2. Reserve-study use became more demanding on August 3, 2026
When a lender relies on a reserve study to demonstrate sufficient reserves, Fannie Mae requires verification that the budget includes the study’s highest recommended reserve allocation amount. The baseline funding method—allowing reserves to approach but not fall below zero—is no longer permitted for this purpose.
Board impact: A current reserve study alone is not enough. The budget and funding decisions must be reconciled to the study’s recommendation.
3. The minimum reserve allocation increases to 15% in 2027
For applicable Full Reviews, the minimum allocation for capital expenditures and deferred maintenance rises from 10% to 15% of annual budgeted income assessments for loan applications dated on or after January 4, 2027.
Board impact: Communities using a calendar-year budget should evaluate the effect during the 2026 budgeting cycle rather than waiting until the first 2027 sale or refinance.
4. Master-policy coverage sufficiency still centers on replacement cost
The master property insurance amount must equal at least 100% of the estimated replacement cost value of project improvements, including common elements and residential structures. Fannie Mae identifies several ways a lender or servicer may document sufficiency, including guaranteed or extended replacement cost, an insurer estimate, an insurance-risk appraisal, or an appropriate professional statement.
Board impact: Maintain a defensible, current statement of values and understand which document the lender is relying on.
5. Roofs must be insured, but replacement-cost settlement is not universal
Fannie Mae retired the universal requirement that roofs be insured on a replacement-cost basis. Roofs still must be insured, but roof loss settlement may be on another permitted basis depending on the policy.
Board impact: “Lender eligible” does not mean the board should ignore the financial effect of actual-cash-value roof settlement. The policy’s age schedule, depreciation, deductible, matching, and reserve plan still matter.
6. The maximum allowable master-policy per-unit deductible is $50,000
For required perils covered by a master property policy, Fannie Mae set the maximum allowable per-unit deductible at $50,000. Lenders were encouraged to implement earlier and required to do so for loans with application dates on or after July 1, 2026.
When the master policy has a per-unit deductible, the borrower must maintain an individual unit-owner property policy. The individual policy must address the applicable required peril and provide at least the greater of the uncovered interior/improvement amount or the per-unit deductible, based on the best information available.
Board impact: The association should understand whether its deductible is truly “per unit,” “per building,” “per location,” or “per occurrence.” Those terms are not interchangeable.
7. This letter does not create a universal D&O mandate
D&O remains an important community-association coverage, but the cited Fannie Mae letter should not be presented as imposing a universal new D&O requirement on every condominium project. Any separate lender, investor, governing-document, or legal requirement should be identified on its own authority.
A practical 2026–2027 readiness checklist
- Confirm which project-review path lenders are using.
- Maintain current master policies, schedules, endorsements, and evidence of coverage.
- Reconcile replacement-cost values to the current property schedule.
- Identify roof loss-settlement terms and model the association’s retained exposure.
- Determine whether any deductible is per unit, per building, per location, or per occurrence.
- Review unit-owner insurance communication where an HO-6 policy is needed.
- Compare the operating budget and reserve contribution with the reserve study.
- Plan for the 15% Full Review threshold before January 4, 2027.
- Keep counsel, reserve professionals, lenders, and insurance advisors in their proper roles.
Official source documents
Fannie Mae Lender Letter LL-2026-03
Fannie Mae Selling Guide Announcement SEL-2026-07
This article is general insurance information, not legal, lending, reserve, engineering, or individualized coverage advice. Fannie Mae requirements apply through lenders and the applicable Guide. Verify the current requirements for the specific transaction.