Agency Condominium Updates
Overview
Fannie Mae and Freddie Mac have jointly announced several updates related to the acceptability of units in condominium projects. Unless otherwise stated, these updates are effective immediately.
| Topic | Update |
|---|---|
| 5-10 Unit Condo Projects | 5- to 10-Unit Condominium Projects that are not part of a Master Association are now exempt from most project approval requirements. The project must not be rejected through Fannie Mae CPM or Freddie Mac LPA findings, or otherwise be an ineligible project.
Responsible Party: CMS Underwriters must confirm eligibility of exempt projects using the new Conventional Agency Exempt from Review Condominium Checklist. |
| New Condominiums in Florida | New condominium projects in Florida no longer require full project approval by Fannie Mae’s Project Eligibility Review Service (PERS). Units in new condominium projects in Florida may use the Lender Full Review approval process through InterIsland. As a reminder, to qualify for new construction condo approval, the project or subject’s legal phase must be substantially complete with at least 50% of the total units sold or under contract to owner-occupants. Responsible party: New condominium projects must be approved by Fannie Mae or InterIsland. |
| Owner Occupancy Requirements | The owner occupancy requirement has been eliminated for existing projects. Previously, at least 50% of units in an existing project were required to be owner occupied for investment property transactions. Owner occupancy requirements for new projects and single-entity ownership limits remain unchanged. Responsible party: Investment properties must be in project approved by Fannie Mae or InterIsland. |
| Master Project Insurance Updates | Several updates and clarifications have been made regarding master insurance policies:
Responsible party: When the InterIsland Full Lender Review is ordered, InterIsland will review the project insurances for acceptability. In all other cases, underwriters are required to review and approve project insurances. |
| HO-6 Insurance | Several updates and clarifications have been made regarding HO-6 unit owner insurance policies:
Responsible party: Underwriters must ensure the sufficiency of HO-6 coverage, when required. |
| Elimination of Limited / Streamlined Condo Reviews | Effective for loan applications dated August 3, 2026, the FNMA Limited Review and FHLMC Streamlined Review options are eliminated. A condominium unit is acceptable when the project is:
Note: CMS certifies projects that were previously approved by InterIsland, which may be reused for 12 months. Responsible Party: Underwriters must complete the Conventional Agency Exempt from Review Condominium Checklist or confirm an appropriate condo approval method was used. |
| Reserve Studies | Effective for loan applications dated August 3, 2026, when a reserve study is used in lieu of a budgeted 10% reserve allocation, the project must fund their reserves at the maximum funding level recommended by the reserve study. Reserve studies often provide multiple options for funding levels, the minimum or baseline options may no longer be used. This update does not apply to projects that contribute at least 10% of their annual assessment income to their reserve account. Responsible party: Sufficiency of reserves is reviewed by InterIsland during the Lender Full Review process. |
Conventional Agency Exempt from Review Condominium Checklist
CMS has developed a new “Conventional Agency Exempt from Review Condominium Checklist” for underwriters to document the eligibility of units in projects that do not require a full lender review. The checklist may also be used as a guide for originators and processors. Condo units in the following project types are generally exempt from review:
- 2-4 Unit Projects
- 5-10 Unit Project that are not part of a Master Association
- Detached Condo Units
- Same Agency Rate/Term Refinances
- For DU: The Fannie Mae Loan Look Up tool reflects the current loan is owned by FNMA and the loan is approved by DU as a Limited Cash Out Refinance, or
- For LPA: The Freddie Mac Loan Look Up tool reflects the current loan is owned by FHLMC and the loan is approved by LPA as a No Cash Out Refinance
Advance Notice of Future Reserve Requirement Changes
Effective for loan applications dated January 4, 2027, the reserve allocation for capital expenditures and deferred maintenance is being increased from a minimum of 10% to a minimum of 15% of the annual budgeted assessment income. All other requirements related to replacement reserves and the review of budget adequacy remained unchanged.
Resources
The CMS Conventional Agency underwriting guidelines and matrices available on CarringtonWholesale.com will be updated the week of August 3, 2026.Refer to the Condo Exempt from Review Checklist on CarringtonWholesale.com for additional information.
Contacts
Please contact your Account Executive or Account Manager with any questions.
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