Condo buyers face new mortgage rules under Fannie Mae, Freddie Mac

Key Points:

• Starting August 3, Fannie Mae and Freddie Mac will implement stricter condo-lending policies requiring more thorough reviews of condo associations' finances, reserve funding, and building maintenance to reduce risks for buyers and lenders.
• These changes eliminate the previous limited review option for many condo projects, potentially lengthening mortgage approval times and increasing the likelihood of loan denials if buildings fail to meet new standards.
• The stricter rules follow concerns raised after the 2021 Surfside condo collapse, prompting tighter underwriting to address deferred maintenance, structural issues, and reserve funding adequacy.
• Beginning January 4, condo associations will be required to hold at least 15% of their annual budget in reserve funds for repairs, up from the current 10%, a move aimed at preventing unexpected special assessments and financial hardship for owners.
• Industry groups have urged regulators to delay the new reserve funding requirement by a year, citing concerns that many condo boards are unprepared for the changes and that the new policies could complicate and slow down the buying process.