Changes to GSE Condo Guidelines – March 2026
Issue Date: March 23, 2026
Fannie Mae and Freddie Mac announced several significant changes to their condominium underwriting guidelines, which lenders must follow when selling loans to the GSEs. The changes affect both project review standards and insurance requirements for condominium projects and individual units.
Following the Surfside condominium collapse in June 2021, the GSEs substantially tightened condo underwriting standards, including reserve requirements, financial reviews, engineering studies, and insurance coverage and documentation. While intended to address safety and underfunding concerns, those changes also constrained financing for many condominium projects.
The new changes generally ease some requirements for smaller projects, while raising financial and insurance expectations for larger or more complex developments. Overall, the changes improve financing flexibility for small projects but increase documentation and compliance burdens for others.
Project and Financial Review Changes
The GSEs made several notable changes to project eligibility and review standards:
- Expanded Waiver of Project Review (WPR)
New and established condo projects with 10 or fewer units may now qualify for a waiver of project review. Projects with 5–10 units must not be part of a master association or larger development. - Elimination of the Limited Review process
Projects previously eligible for Limited Review must now undergo a Full Review, unless they qualify for a WPR. - Higher Reserve Requirements
Required reserves for capital expenditures and deferred maintenance increase from 10% to 15% of the annual budget for projects reviewed under the Full Review process. This requirement takes effect for Full Reviews beginning in January 2027. - Stricter Reserve Study Use
If a reserve study is used instead of standard GSE benchmarks, lenders must now rely on the highest recommended reserve amount in the study. - Investor Concentration Changes
The 50% investor concentration cap is eliminated for established projects reviewed under Full Review (presale requirements for new projects remain).
Insurance Requirement Changes
The GSEs also updated association master insurance requirements in response to rising premiums and ongoing availability challenges. While some changes apply more broadly to one‑ to four‑unit properties, those updates are largely clarifications.
Key insurance updates include:
- Roofs No Longer Required to Be Insured at Replacement Cost
Roofs must still be insured, but policies may now permit certain roof losses, typically wind or hail, to be settled on an actual cash value (ACV) basis. ACV accounts for depreciation and may result in claim payments that are significantly lower than the cost to fully replace a roof. - Higher Allowable Deductibles
Master property insurance policies may now include per‑unit deductibles of up to $50,000, provided unit owners carry supplemental coverage sufficient to cover the deductible amount. - Simplified Documentation of Coverage Sufficiency
Lenders may rely on insurer statements, appraisals, or other professional estimates to confirm that coverage is settled on a replacement‑cost basis, rather than independently documenting values.
What This Means for Real Estate Professionals and Consumers
- Smaller condo projects may benefit from streamlined reviews and improved access to financing.
- Larger projects will face higher reserve and documentation expectations, which could increase HOA fees or result in special assessments.
- Greater insurance flexibility may reduce premium pressure on master association policies, but it may also shift costs to unit owners, who may need to purchase supplemental coverage or face special assessments when insurance claim payments are insufficient to cover losses.
- Lenders will rely more heavily on HOA‑provided documentation, underscoring the importance of accurate budgets, reserve studies, and insurance disclosures during transactions.
- Condominium associations, mortgage market participants, and insurance carriers will need to coordinate more closely to ensure timely sharing of insurance information, particularly with respect to unit‑level coverage required to address deductibles assessed by associations.
For questions on GSE project review changes, please contact Ken Fears, director of conventional housing finance and valuation policy, at [email protected].
For insurance‑related questions, please contact Austin Perez, senior policy representative – insurance issues, at [email protected].