Important Funding Changes
Communities with Fannie Mae/Freddie Mac Mortgages
Attention Community Association Managers! Stay up-to-date on new funding requirements affecting condominium communities with Fannie Mae or Freddie Mac-backed loans, as detailed in Lender Letter (LL-2026-03). Effective soon, there will be changes to the minimum replacement reserve funding in community’s budgets.
What’s Changing
- Beginning January 4, 2027, community’s must contribute a minimum of 15% of their annual budgeted assessment to replacement Reserves. This is an increase from the previous 10% contribution requirement.
- Effective August 3, 2026, as an alternate to the above 15% requirement, a community may use a recent Reserve Study to demonstrate they have sufficient reserves. The policy further stipulates that the community’s budget must reflect the highest recommended reserve contribution presented in the Reserve Study. Baseline funding is no longer permitted.
- Greater focus on reserve adequacy to reduce deferred maintenance and special assessments.
Why This Matters
Communities that do not meet these standards may face:
- Loan approval delays or denials
- Reduced property marketability
- Increased pressure on boards and owners to resolve funding and compliance issues
What Managers Should Do Now
- Review your current reserve study
- Confirm which funding scenario your community is following
- Plan ahead for potential budget adjustments before lender reviews occur
How Becht Can Help
As can be seen by this new standard, a community’s capital reserve study is facing increased scrutiny by mortgage lenders. Individual states are also starting to regulate reserve studies with prescriptive legislation. Becht Engineering BT, one of the initial providers of capital reserve studies for community associations remains focused on all these new regulations to keep our clients informed and educated so they can make the best choices for their community. Becht provides capital reserve studies that meet lender requirements and assist communities in planning responsibly for their future. By planning ahead today, you can help protect property values in the years to come. To review your reserve funding strategy, connect with Becht’s Reserve Specialists at 800.772.7991 or information@bechtbt.com.