The 2027 Condo Reserve Rule: What Boston Boards Need to Do Before Budget Season

Short version: for condo mortgages dated January 4, 2027 or later, Fannie Mae and Freddie Mac want your association putting at least 15% of assessment income into reserves. It has been 10%. If your building comes up short, it can be flagged non-warrantable, and that makes units hard to sell.

What changed

Fannie Mae’s Lender Letter LL-2026-03 raises the reserve test for condo projects from 10% to 15% of the association’s assessment income, and Freddie Mac made the matching change. It applies to any loan dated January 4, 2027 or later.

Why your board should care

If your reserves come up short, your building can get flagged non-warrantable. That means:

• Buyers can’t get a normal conventional mortgage on your units.
• Owners have a hard time selling, or refinancing.
• Everybody’s value takes the hit, not just the person trying to sell.

The other way to qualify

Have a reserve study that’s less than three years old, and fund it at the highest level it recommends. Not the baseline. The highest.

What I’d do before your next budget

1. Take your reserve line.
2. Compare it to 15% of your assessments.
3. If you’re under, either raise it, or get a current reserve study and fund it all the way.

Most boards are building their 2027 budget right now. This is the year to get it right.

Common questions

When does the 15% reserve rule start?

It applies to condo loans dated January 4, 2027 or later.

What happens if our association is under 15%?

The building can be flagged non-warrantable, so buyers can’t get a conventional mortgage on units until it’s fixed. Owners have a harder time selling or refinancing.

Is there another way to meet the requirement?

Yes. A reserve study less than three years old, funded at the highest level it recommends, also qualifies.

Want a second set of eyes on your reserve line? We manage 60+ condo associations across Greater Boston. Book a free 20-min call or call 617-982-0116.