Some rules take effect immediately and could lower your HOA dues. Others kick in over the next nine months and could disqualify your building from conventional financing. Here is the full breakdown.
Key Takeaways
- Roofs can now be insured at actual cash value rather than replacement cost, which could immediately lower insurance premiums.
- The 50% investor concentration limit has been removed, reopening Fannie Mae eligibility for many South Florida buildings.
- Reserve requirements increase from 10% to 15% on January 4, 2027, and only 3% of buildings currently meet that threshold.
Fannie Mae announced a sweeping set of updates to how it evaluates and approves condo buildings for conventional financing. The changes are split into two categories: good news that is effective right now, and a reserve requirement increase that kicks in on January 4, 2027. We spoke with a South Florida lender who walked through every change, and here is what Palm Beach County and Broward County condo owners need to know.
What changed immediately?
As Larry Mastropieri explained on the Discover South Florida Podcast: "They're making these changes to improve how the condo world operates because there's been a ton of issues: deferred maintenance, high insurance, things like that across the country. Fannie and Freddie were created to create liquidity in the residential market, so they want to make homeownership more affordable, but at the same time protect themselves, protect the lender, and make sure they get paid back."
Roof insurance flexibility: Buildings can now insure roofs at actual cash value (ACV) instead of full replacement cost value (RCV). For an older condo building with a roof nearing the end of its life and already budgeted for replacement, this switch could dramatically lower its insurance premium and, by extension, monthly HOA dues. We covered how this rule change works in detail last week.
Deductible cap standardized: The per-unit deductible standard has been simplified and capped at $50,000. Before this, different lenders interpreted the requirement differently, creating inconsistency across the board. The cap removes that ambiguity and is expected to lower premiums for many buildings.
Small condo waiver expanded: Small condo buildings of ten units or fewer are now exempt from the Fannie Mae review process entirely. The previous threshold was four units.
New construction streamlined: New construction condos no longer have to go through the lengthy PERT (project eligibility review) registration process with Fannie Mae. Lenders can now handle the standard full review directly.
Why does the investor concentration removal matter?
The investor concentration limit has been removed entirely. Previously, buildings with more than 50% investor-owned units could not pass a full Fannie Mae review. That restriction is gone, which opens the door for a significant number of South Florida condo buildings that were previously ineligible.
Larry added: "If over 50% of units were investor-owned, a building couldn't pass review. That rule quantified risk, as investors might abandon properties in downturns. With its removal, more buildings qualify for better loans and more owner-occupants can get financing."
If your building is stuck in non-warrantable status due to short-term rental or investor unit ratios, it is worth having your lender recheck eligibility now.
Not sure if your building qualifies under the new rules? Talk to a South Florida real estate agent who understands how Fannie Mae eligibility affects condo values and buyer pools. Reach out to The Mastropieri Group or call (561) 544-7000.
What changes in August 2026?
The limited review process, which allowed buyers to put down 25% to skip the full review, is being eliminated effective August 3, 2026. In Florida, this change is less impactful than elsewhere because we have been operating closer to a full review standard since the Surfside collapse. But it is worth knowing if you are buying or selling in the next few months.
What changes in January 2027?
Reserve requirements are increasing from 10% to 15% of a condo association's annual budget, effective January 4, 2027. That sounds incremental, but the impact is significant. According to industry data from one of the largest condo review firms in the country, only 3% of the buildings they have worked with currently have reserves at or above 15%. That means the vast majority of condo buildings in South Florida will need to increase their reserve funding within nine months.
Industry pushback is already underway. Lenders and condo industry groups are pushing the FHFA to delay or reduce the 15% reserve requirement. There is a real possibility that it gets extended or softened before January. But it would be a mistake to assume that will happen.
What happens if a building loses Fannie Mae approval? It does not mean financing disappears entirely. Non-QM and non-warrantable condo lenders can still provide financing, typically at a rate that is a quarter to a full percent higher than conventional. It is not the end of the road, but it does shrink the buyer pool and can affect resale values. Non-warrantable status is not permanent. If a building improves its reserves, it can refinance back to conventional later.
What should condo owners and buyers do now?
If you own a condo unit: Send this article to your HOA board today. Most of them do not know these changes exist yet. The insurance switch to actual cash value is something they can act on right now, and it could result in lower monthly dues before the year is out. We've covered Florida's broader condo challenges and how boards are navigating them.
If you are buying a condo: Ask whether the building has already been reviewed under the full Fannie Mae standards and where their reserves currently stand. A building at 10% reserves that has not addressed the January deadline is a different risk profile than one already at 12% or 13%.
If you are selling in a building with reserve shortfalls: The window to address this before it affects your buyer pool is shrinking. The January 4, 2027, deadline is nine months away. That is not a lot of time for associations to restructure their budgets.
Florida buildings that increased deductibles above 5% to offset insurance costs may have already lost Fannie Mae eligibility. The new ACV option could allow them to reduce deductibles and requalify. Special assessments and litigation remain the primary drivers of condo disqualification in Florida, more so than budget and reserve shortfalls alone.
FAQs about Fannie Mae condo changes
Can condo buildings switch to actual cash value roof insurance now?
Yes. This change is effective immediately. Buildings with older roofs that are already budgeted for near-term replacement should contact their insurance agent to evaluate switching from replacement cost to actual cash value coverage. This can significantly reduce premiums.
What is the new reserve requirement for Fannie Mae approval?
Starting January 4, 2027, condo associations must allocate at least 15% of their annual budgeted income to reserves. The current requirement is 10%. Only 3% of buildings currently meet the new threshold.
What happens if my building loses Fannie Mae approval?
Financing does not disappear entirely. Non-QM and non-warrantable condo lenders can still provide loans, typically at rates 0.25% to 1.00% higher than conventional. However, this shrinks the buyer pool and can affect resale values.
Does the investor concentration limit removal help my building?
If your building previously failed Fannie Mae review because more than 50% of units were investor-owned, it may now qualify. Have your lender recheck eligibility under the new rules.
How does this interact with Florida's SIRS requirements?
Florida's Structural Integrity Reserve Study (SIRS) requirements remain in effect alongside these new Fannie Mae rules. Buildings must comply with both. The Fannie Mae changes do not replace or override Florida-specific condo legislation.
Local help for condo buyers and sellers in South Florida
If you're buying, selling, or investing in condos in Boca Raton, Delray Beach, West Palm Beach, or anywhere in South Florida, understanding how Fannie Mae eligibility affects your options matters. Reach out to The Mastropieri Group, Realtors®.
For practical, hands-on support across South Florida, call (561) 544-7000.
Posted by Larry Mastropieri
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