Live training · True Blue Lending
The New Fannie Mae
Condo Rules
What changed, what is already mandatory, and how to pre-screen a project before you write the offer.
Jesse Gonzalez, President, True Blue Lending Corporation | NMLS #278103 | Company NMLS #2380218
Why this matters
A condo file that closed
last year may not close now.
Same building. Same buyer. Same loan amount. Different rulebook.
The source
Lender Letter LL-2026-03
Issued March 18, 2026. Updates to Project Standards and Property Insurance Requirements.
Scope
Six project standards changes
Plus a full rewrite of property insurance requirements
Coordination
Aligned with Freddie Mac
Issued in coordination with FHFA, so expect parallel treatment
Source: Fannie Mae Lender Letter LL-2026-03, March 18, 2026. Updates Selling Guide B4-2 and B7-3, and Servicing Guide B2.
Read this one twice
Most of this is
already mandatory.
| Date | What became required | Status |
|---|
| July 1, 2026 | Master policy per-unit deductible cap, and the new unit owners policy rules | In effect |
| Aug 3, 2026 | Limited Review retired. Enhanced reserve study rules required. | In effect |
| Jan 1, 2027 | Servicer insurance monitoring and annual borrower reminder | Coming |
| Jan 4, 2027 | Replacement reserve minimum rises to 15% | Coming |
Several other changes were effective immediately on publication. Verify the current Selling Guide for your specific scenario.
What we'll cover
Six changes.
One new insurance regime.
- 01 Limited Review is gone, and what replaces it
- 02 Waiver of Project Review just got much wider
- 03 Investor concentration limits retired
- 04 Florida PERS requirement retired
- 05 Reserve studies: the baseline funding loophole is closed
- 06 Replacement reserves going from 10% to 15%
- 07 Insurance: deductible caps, coverage sufficiency, and HO-6
Change 01 · The big one
Limited Review is retired.
BEFORE
Established projects could use Limited Review: a short questionnaire, minimal budget scrutiny.
→
NOW
Full Review, or Waiver of Project Review where the project qualifies.
Mandatory for all loan applications dated on or after August 3, 2026. This also retires the remaining geographic restrictions that applied to Florida.
Change 01 · What it costs you
What Full Review
actually demands
- Full HOA questionnaire, not the short form
- Current budget, reviewed for reserve adequacy
- Reserve analysis: is the allocation sufficient
- Critical repairs and deferred maintenance disclosure
- Litigation review
- Insurance meeting the new B7-3 standards
The practical effect
Turn times get longer, and more projects fail.
The questionnaire is the choke point. Management companies are slow, and some charge for it. Order it the day you go under contract, not the week before closing.
Change 02 · Good news
Waiver of Project Review
just got much wider.
10
units or fewer now qualifies, new and established projects.
Conditions
Not "Unavailable" in CPM
Must meet applicable B7-3 insurance requirements
5 to 10 unit projects
Cannot be part of a master association or larger development
Worth knowing
No general liability or fidelity insurance required
When the project qualifies for the waiver
Effective immediately. On a Fannie-to-Fannie limited cash-out refinance, there must also be no critical repairs or evacuation orders in place.
Change 03
Investor concentration
limits are retired.
RETIRED
The 50% investment property concentration limit on established projects under Full Review, for investor loans.
→
STILL APPLIES
Presale: at least 50% of total units in the project or legal phase must be conveyed or under contract to principal residence or second home buyers.
Do not confuse the two. Concentration is gone. Presale is not.
Change 04 · Florida
PERS review retired for
new Florida condo projects.
New or newly converted projects with attached units in Florida no longer have to go through Fannie Mae's Project Eligibility Review Service.
Instead
Lender-delegated Full Review, same as any other new attached project.
Change 05 · The quiet killer
The reserve study
loophole is closed.
- If a lender uses a reserve study to show sufficient reserves, the budget must include the highest recommended reserve allocation amount in that study
- The baseline funding method is no longer permitted: the approach that lets the reserve balance approach, but never fall below, zero
- Mandatory for applications dated on or after August 3, 2026
A project can hand you a professional reserve study and still fail, because the study's own low-end funding scenario is no longer acceptable.
Change 06 · Coming January 2027
Replacement reserves:
10% becomes 15%.
TODAY
Minimum 10% of the annual budgeted income assessment allocated to capital expenditures and deferred maintenance
→
JAN 4, 2027
Minimum 15%, under Full Review, for applications dated on or after that date
HOA boards are writing 2027 budgets right now. A project that budgets 10% next year will fail Full Review in January.
Part two
Now the insurance rules.
Half of LL-2026-03 is a rewrite of property insurance requirements: for individual units, for master policies, and for servicers.
Insurance · 1 to 4 units
Roofs no longer need
replacement cost coverage.
- Policy must provide coverage on a replacement cost basis, with the exception of roofs
- Roofs must be insured, but not necessarily at replacement cost
- Actual cash value is acceptable for personal property and structures that are not buildings
- The old requirement to document replacement cost value is retired
Effective immediately. Real relief in markets where carriers have moved to actual cash value on roofs.
Insurance · Master policy
Coverage sufficiency:
five ways to prove it.
Master policy must equal at least 100% of estimated replacement cost value of the project improvements. The lender may rely on any one of:
- 01 Guaranteed replacement cost coverage, or equivalent
- 02 Extended replacement cost coverage, or equivalent
- 03 A replacement cost value estimate provided by the insurer
- 04 The project's insurance risk appraisal
- 05 A statement from the insurer or other qualified professional
The inflation guard requirement for project developments is retired. Loss settlement is replacement cost, again with the roof exception.
Insurance · The number to remember
$50,000 per unit.
$50K
Maximum allowable per-unit deductible on a master policy, for all required perils.
The trigger
If the master policy has a per-unit deductible, the borrower must carry a unit owners policy.
Status
Required since July 1, 2026
Applies to loans with application dates on or after that date
Insurance · Unit owners policy
When your buyer needs
an HO-6, and how much.
Required when
- Any portion of the unit interior or improvements is not covered by the master policy, or
- The master policy includes a per-unit deductible
Coverage is the greater of
- Enough to restore the unit to its pre-loss condition for anything the master does not cover, or
- The amount of the per-unit deductible
Max HO-6 deductible
Greater of 5% of coverage, or $2,500
Loss settlement must be replacement cost. If the master has a per-unit deductible for a specific peril, the unit owners policy must cover that peril.
For agents
Pre-screen before
you write the offer.
- 01 How many units? Ten or fewer may qualify for a waiver and skip most of this
- 02 What percent of the budget goes to reserves? Under 10% is a warning, 15% is the 2027 bar
- 03 Is there a reserve study, and does the budget fund its highest recommended amount
- 04 Any special assessments, current or planned
- 05 Any critical repairs, deferred maintenance, or evacuation orders
- 06 Any active litigation
- 07 What is the master policy per-unit deductible
- 08 How long does the management company take to return a questionnaire
For loan officers
Change your process,
not just your knowledge.
- Order the questionnaire day one. It is now the longest pole in the tent
- Check CPM early for an "Unavailable" status before you spend anyone's money
- Read the budget yourself. Find the reserve line before underwriting does
- Ask for the master policy dec page up front and look at the per-unit deductible
- Set the HO-6 expectation at pre-approval, not at closing
- Stop quoting Limited Review. It does not exist anymore
If you remember three things
The short version.
One
Limited Review is gone.
Full Review or a waiver. Already mandatory as of August 3.
Two
Reserves are the new battleground.
Highest recommended allocation, no baseline funding, and 15% starting January 2027.
Three
Check the master deductible.
$50,000 cap per unit, and any per-unit deductible triggers a required HO-6.
Questions
Send me the
project address.
I will tell you whether it is financeable before your client writes the offer. That call is free and it takes about a day.
Jesse Gonzalez
707-595-5393
President and Founder, True Blue Lending Corporation
Licensing
NMLS #278103
Company NMLS #2380218 · CA DRE #01855372
This presentation summarizes Fannie Mae Lender Letter LL-2026-03 (March 18, 2026) for educational purposes. It is not legal or compliance advice. Always verify current requirements against the Fannie Mae Selling Guide and any investor overlays for the specific transaction.