Fannie, Freddie Raise Condo Reserve Floor to 15%, Squeeze Miami

Fannie Mae and Freddie Mac have both moved to raise the bar for financing a condo purchase, and the changes land hardest on the country’s most condo-exposed market. Fannie’s Lender Letter LL-2026-03, issued March 18, eliminates the streamlined Limited Review path for established projects over 10 units effective for applications dated August 3, 2026 or later, and raises the minimum reserve funding requirement from 10% to 15% of budgeted assessment income for applications dated January 4, 2027 or later. Freddie Mac’s Guide Bulletin 2026-C retires its parallel Streamlined Review on the same August date and matches the 15% reserve floor on the same January date.

Why it matters

For Miami, where post-Surfside milestone inspection and reserve-funding laws are already forcing associations to raise assessments, this is a second squeeze layered on top of the first. Every conventional loan on an established building will now require Full Review, meaning a lender must dig into the association’s budget, delinquency rate, litigation and inspection history before a buyer can close. A building that cannot document adequate reserves or a clean milestone inspection risks losing conventional financing eligibility altogether, which caps what units in that building can sell for and, by extension, what a termination sponsor can justify paying to assemble it.

The numbers

The reserve floor moves from 10% to 15% of total annual budgeted assessment income, effective for applications dated January 4, 2027 or later. Limited Review and Streamlined Review both disappear for projects over 10 units on August 3, 2026, six months ahead of the reserve change. A board can avoid the 15% floor only by commissioning a reserve study within the last three years and funding at that study’s highest recommended level.

What’s next

Boards in older South Florida buildings have roughly four months, from now to the August 3 deadline, to get Full Review documentation in order before every loan application requires it, and roughly a year to either fund reserves to 15% or produce a qualifying reserve study before the January deadline. Buildings that miss both will see buyer financing narrow, which is exactly the condition that pushes owners toward a termination sale rather than a unit-by-unit resale.