Fannie Mae and Freddie Mac HOA requirements: a title company checklist

Why Fannie/Freddie Standards Matter to Title Companies

Fannie Mae and Freddie Mac purchase the majority of conventional residential mortgages in the United States. When a lender originates a loan, it typically does so with the intent to sell that loan to one of the GSEs. To complete the sale, the loan must meet the GSE's eligibility standards—and the property securing the loan must meet the project's standards.

For title companies, this means that project eligibility is a closing-critical issue. A title company that identifies a condo project ineligibility early gives the lender time to pivot to a portfolio product, the buyer time to seek alternative financing, or the seller time to address the deficiency. A title company that misses the issue until underwriting review risks a delayed closing, a lost commission, and a damaged lender relationship.

Moreover, lenders face repurchase risk when they deliver loans to the GSEs that do not meet project standards. If a post-closing audit reveals an ineligible project, the lender may be required to repurchase the loan. Title companies that provide thorough HOA documentation and early eligibility flags are valued partners because they reduce that repurchase exposure.

Fannie Mae Selling Guide Overview

The Fannie Mae Selling Guide, specifically Section B4-2 (Project Standards), governs the eligibility of condominium projects, planned unit developments (PUDs), and cooperative projects. On March 18, 2026, Fannie Mae issued Lender Letter LL-2026-03, which updated project standards and property insurance requirements in coordination with Freddie Mac and the Federal Housing Finance Agency. The updated Selling Guide was published April 1, 2026.

Key Fannie Mae project review methods include:

• Full Review. A comprehensive evaluation of the project's budget, reserves, insurance, delinquencies, litigation, and ownership concentration. Required for most condo projects effective August 3, 2026.
• Waiver of Project Review. Available for certain detached condos, two- to four-unit projects, and—under the new rules—projects with 10 or fewer units. Lenders must still comply with all waiver requirements in Selling Guide B4-2.1-02.
• Fannie Mae Condo Project Manager (CPM). An online tool that allows lenders to determine whether a project has already been reviewed and approved by Fannie Mae.

For title companies, the practical implication is that every condo file should be screened for project eligibility at intake, not at the last minute. The days of " Limited Review " shortcuts are ending.

Freddie Mac Requirements

Freddie Mac's requirements are set forth in the Freddie Mac Seller/Servicer Guide, with project standards found primarily in Section 5701. Freddie Mac's standards are coordinated with Fannie Mae's, meaning the two GSEs have aligned on the 2026 updates.

Key Freddie Mac provisions include:

• Project review types. Freddie Mac uses Full Review, Streamlined Review, and Waiver categories. The Streamlined Review option is also being retired for most projects in alignment with Fannie Mae's elimination of Limited Review.
• HOA fee assessments. Under Guide Section 5701.6, the assessment at closing must equal a minimum of two months of HOA fees attributable to the unit and be due and payable at closing.
• Deductible requirements. The PUD homeowners association may purchase a deductible buy-back insurance policy to meet Freddie Mac's deductible requirements if the master policy deductible exceeds permissible limits.

Title companies working with lenders that sell to both GSEs should verify which project's guidelines the lender is following and document the review accordingly.

Master Insurance Policy Adequacy

Insurance is one of the most scrutinized elements of condo project eligibility. Under the updated 2026 guidelines, the master property insurance policy must cover at least 100% of the estimated replacement cost value of the project, including common elements and residential structures. Lenders may now use several forms of documentation to verify sufficiency:

• Guaranteed replacement cost coverage or its equivalent.
• Extended replacement cost coverage or its equivalent.
• A replacement cost value estimate provided by the insurer.
• The project's insurance risk appraisal.
• A statement from the insurer or other qualified professional.

The 2026 updates also introduced important changes:

• Roof coverage flexibility. Roofs no longer must be insured on a replacement cost basis. They may now be covered on an actual cash value basis, which should reduce premiums for many associations.
• $50,000 per-unit deductible cap. Effective July 1, 2026, the maximum deductible per unit is capped at $50,000. If the deductible exceeds this amount, the association must adjust the policy or unit owners must carry supplemental coverage sufficient to cover the deductible.
• Elimination of inflation guard requirement. The prior requirement for inflation guard coverage has been removed.

Title companies should request a current certificate of insurance (COI) for the master policy, verify the coverage amount, deductible, and roof valuation method, and confirm the policy is not scheduled to lapse before closing.

HOA Reserve Standards

Reserve funding is the headline change of the 2026 updates. Fannie Mae has raised the minimum reserve allocation requirement for capital expenditures and deferred maintenance from 10% to 15% of the annual budgeted assessment income. This change is effective for all loan applications dated on or after January 4, 2027.

There is an exception: if the association has a current reserve study completed or updated within the past three years, and the budget reflects the highest recommended reserve allocation from that study, the 15% minimum does not apply. However, the baseline funding method—which targets a near-zero reserve balance—is no longer acceptable under any circumstances. Effective August 3, 2026, lenders must verify that the project's budget includes the highest recommended reserve allocation amount identified in the reserve study.

For title companies, this means:

• Request the association's current annual budget and verify the reserve line item as a percentage of total assessment income.
• If the reserve percentage is below 15%, request the reserve study and confirm the budget aligns with the study's highest funding recommendation.
• Confirm the reserve study is dated within the last 36 months and includes a 30-year funding plan.

Associations that have deferred reserve funding will face pressure to increase assessments or levy special assessments. Title companies should flag underfunded reserves early so lenders and buyers are not surprised during underwriting. For more on financial red flags, see our guide to HOA financial red flags at closing.

Litigation Status Verification

Pending litigation is one of the fastest ways to render a condo project ineligible. Fannie Mae's Selling Guide B4-2.1-03 sets strict boundaries:

• Ineligible litigation. Projects where the HOA or developer is a defendant in litigation involving safety, structural soundness, habitability, or functional use are ineligible. This includes construction defect claims, mold litigation, and significant water intrusion disputes.
• Eligible litigation. Minor litigation may be eligible if the HOA is the plaintiff, the matter is covered by insurance, and the anticipated damages and legal fees do not exceed approximately 10% of the project's funded reserves. Non-monetary disputes, such as neighbor encroachment claims, may also be permissible.
• Foreclosure actions. The HOA acting as plaintiff in a foreclosure action for past-due assessments is generally eligible.

Title companies should verify litigation status through the HOA questionnaire, direct communication with the management company, and a search of the local court docket. Do not rely solely on the seller's representation. If litigation is identified, obtain the complaint, the association's insurance coverage letter, and an estimate of potential exposure.

Budget Review and Assessment Stability

The GSEs require that the association's budget be adequate to fund operations, reserves, and debt service without extraordinary assessments. Key checkpoints include:

• Balanced budget. The budget should show that assessment income is sufficient to cover operating expenses and the required reserve contribution. A deficit budget is a red flag.
• No significant special assessments. A special assessment levied for operating shortfalls or deferred maintenance suggests financial distress. A capital improvement assessment may be acceptable if it is fully disclosed and funded.
• Stable assessments. Dramatic year-over-year increases in regular assessments may indicate poor financial management or underfunded reserves.
• Adequate insurance line items. The budget should reflect premiums for the master policy, liability coverage, fidelity bond, and any other required insurance.

Title companies should obtain the current year's approved budget and the prior year's actual financials. Compare the two to identify variances, deferred maintenance, or reserve shortfalls.

Commercial Space and Ownership Limits

Fannie Mae and Freddie Mac impose limits on the non-residential and investor ownership concentration within a project:

• Commercial space. No more than 35% of the total above-grade square footage may be allocated to non-residential or commercial use. Projects exceeding this threshold are ineligible.
• Single-entity ownership. The 2026 updates removed the prior 50% investor concentration cap for established projects. However, for new construction projects, pre-sale requirements still apply. For smaller projects (5–20 units), no more than two units may be owned by a single entity; for projects with 21 or more units, the single-entity limit is typically 20% unless the project is otherwise eligible.

Title companies can verify commercial space percentages through the condominium declaration, site plans, or the appraisal. Ownership concentration is verified through the HOA questionnaire and a review of the unit deed records.

Delinquency Rate Thresholds

High delinquency rates signal financial instability. Fannie Mae generally considers a project ineligible if 15% or more of the total units are 60 days or more delinquent on their HOA assessments. Freddie Mac applies a similar standard.

Title companies should request a current delinquency report from the management company or include the question on the HOA questionnaire. If delinquencies are elevated, determine whether the association has adopted a collection policy, whether foreclosures are pending, and whether the budget relies on assessments from delinquent units.

Warrantable vs. Non-Warrantable Condos

Understanding the distinction between warrantable and non-warrantable condos is essential for title teams:

• Warrantable condo. A project that meets all Fannie Mae and Freddie Mac eligibility requirements. Conventional financing is readily available, and loans are saleable to the GSEs.
• Non-warrantable condo. A project that fails one or more eligibility criteria. This includes projects with excessive commercial space, active construction defect litigation, inadequate insurance, delinquency rates above threshold, or reserve funding below minimums.

Non-warrantable condos are not dead deals, but they require alternative financing. Options include portfolio loans, non-QM products, and all-cash purchases. The title company's role is to identify non-warrantable status as early as possible so the lender can adjust product offerings and the buyer can make an informed decision. For more on investor financing considerations, see our article on DSCR loan investor HOA checklists.

What to Do When a Property Does Not Meet Requirements

When a title company identifies a project eligibility issue, the response should be structured and documented:

• Alert the lender immediately. Do not wait for the appraisal or underwriting review. The sooner the lender knows, the more options remain.
• Document the deficiency. Cite the specific Selling Guide or Seller/Servicer Guide section that the project violates. Attach supporting documents (budget, reserve study, insurance certificate, litigation complaint).
• Determine if the issue is curable. Some deficiencies—such as an expired reserve study or a high deductible—can be remedied before closing. Others, such as active structural litigation, cannot.
• Explore alternative financing. If the project is non-warrantable, ask the lender whether a portfolio product or non-QM loan is available.
• Communicate with all parties. Keep the buyer, seller, and real estate agents informed of the status and timeline. Uncertainty kills more deals than bad news.

Title companies that handle eligibility issues transparently and efficiently build reputations as problem-solvers rather than deal-killers. For guidance on navigating difficult HOA situations, see our post on HOA bankruptcy and receivership for title agents.

Comprehensive Checklist

Use this table as a quick-reference guide for every condo and HOA-governed file:

Requirement	Fannie Mae Standard	Freddie Mac Standard	How Title Companies Verify
Master insurance coverage	100% of estimated replacement cost; roof may be actual cash value; $50K per-unit deductible cap (eff. 7/1/2026)	Aligned with Fannie Mae; deductible buy-back permitted for PUDs	Request current COI; verify coverage amount, deductible, and expiration date
Reserve funding	15% of annual budgeted assessment income (eff. 1/4/2027) or highest reserve study recommendation	Aligned with Fannie Mae; 8% minimum in some legacy guidelines	Review budget and reserve study; confirm study is within 36 months
Reserve study	Highest recommended funding level required; baseline funding eliminated (eff. 8/3/2026)	Aligned with Fannie Mae	Obtain reserve study; match funding level to budget line item
Litigation	Ineligible if safety/structural; minor litigation OK if insured and under 10% of reserves	Aligned with Fannie Mae	HOA questionnaire, court docket search, insurance coverage letter
Budget adequacy	Balanced budget; no operating deficits; stable assessments	Aligned with Fannie Mae	Compare current budget to prior-year actuals; review for special assessments
Commercial space	Max 35% of total above-grade square footage	Aligned with Fannie Mae	Review condo declaration and site plans; confirm with appraisal
Single-entity ownership	50% investor cap removed for established projects; 2-unit limit for 5–20 unit projects	Aligned with Fannie Mae	HOA questionnaire; deed record review for concentration
Delinquency rate	Generally ineligible if 15%+ of units are 60+ days delinquent	Similar standard	Request delinquency report from management company
Project review type	Full Review or Waiver; Limited Review eliminated for >10 units (eff. 8/3/2026)	Full Review or Waiver; Streamlined Review aligned with Fannie Mae changes	Confirm review type with lender; check CPM or Condo Project Advisor
HOA fees at closing	Assessment for minimum 2 months due at closing per lender guidelines	Minimum 2 months of HOA fees due and payable at closing	Verify estoppel or closing letter for prorated and upfront amounts

Frequently Asked Questions

What is the difference between a warrantable and non-warrantable condo?

A warrantable condo meets Fannie Mae and Freddie Mac project standards, including insurance, reserve, litigation, budget, and ownership criteria. Lenders can sell loans on warrantable condos to the GSEs. A non-warrantable condo fails one or more of these criteria, which restricts financing to portfolio loans, non-QM products, or cash transactions.

What is the new Fannie Mae reserve requirement for condos?

Effective January 4, 2027, Fannie Mae requires condominium associations to budget a minimum of 15% of annual budgeted assessment income toward replacement reserves, up from the previous 10% minimum. An association can avoid the 15% formula if it has a current reserve study (within three years) and funds reserves at the highest recommended level. Baseline funding is no longer acceptable.

Can a condo with pending litigation still qualify for Fannie Mae financing?

It depends on the nature of the litigation. Litigation involving safety, structural soundness, habitability, or functional use renders a project ineligible. Minor litigation may be eligible if the HOA is the plaintiff, the matter is insured, and anticipated damages and legal fees do not exceed approximately 10% of the project's funded reserves. Non-monetary disputes such as neighbor complaints may also be eligible.

What insurance requirements must an HOA meet for Fannie Mae and Freddie Mac?

The master property insurance policy must cover at least 100% of the estimated replacement cost of the project. Effective July 1, 2026, the per-unit deductible is capped at $50,000. Roofs may be covered on an actual cash value basis. The association must also maintain liability, fidelity, and hazard insurance. Individual unit owners typically need HO-6 coverage for interior contents and improvements.

What happens if a condo does not meet Fannie Mae or Freddie Mac requirements?

If a condo project does not meet GSE requirements, the loan cannot be sold to Fannie Mae or Freddie Mac. The borrower may need to seek portfolio financing, a non-QM loan, or pay cash. For the title company, this means early identification of non-warrantable status is critical so the lender can pivot product types or the buyer can adjust expectations before appraisal and underwriting costs are sunk.

When does the Limited Review process end for condo projects?

Fannie Mae and Freddie Mac are eliminating the Limited Review process for established condominium projects with more than 10 units. Effective August 3, 2026, all such projects must undergo Full Review or qualify for a Waiver of Project Review. Projects with 10 or fewer units may now be eligible for a waiver, up from the previous threshold of four units.

How can title companies verify Fannie Mae and Freddie Mac condo eligibility?

Title companies should review the HOA budget, reserve study, insurance certificates, delinquency report, litigation status, and ownership concentration. Cross-reference findings against the Fannie Mae Selling Guide (Section B4-2) and the Freddie Mac Seller/Servicer Guide. For established projects, the Fannie Mae Condo Project Manager (CPM) and Freddie Mac Condo Project Advisor are useful online tools.

Key Takeaways

Fannie Mae and Freddie Mac project standards are evolving rapidly, and title companies are on the front lines of compliance verification. Here is what to prioritize:

• The 2026 updates eliminate Limited Review for most projects, raise reserve requirements to 15%, cap insurance deductibles at $50,000 per unit, and remove the 50% investor ownership cap for established projects.
• Master insurance must cover 100% of replacement cost, roofs may use actual cash value, and the association must maintain liability and fidelity coverage.
• Reserve studies must be current (within 36 months) and must fund at the highest recommended level; baseline funding is no longer permitted.
• Litigation involving safety or structural issues renders a project ineligible; minor litigation may be permissible if insured and within reserve limits.
• Delinquency rates above 15% of units (60+ days) and commercial space above 35% of square footage are red flags that can kill GSE eligibility.
• Warrantable condos qualify for conventional financing; non-warrantable condos require portfolio or non-QM alternatives.
• Title companies that verify project eligibility at intake—not at the 11th hour—protect their lender relationships and reduce closing delays.

For title teams handling a high volume of condo transactions, the new requirements mean more documentation, earlier ordering, and tighter coordination with lenders. If your team needs support pulling HOA budgets, reserve studies, and insurance certificates, a professional retrieval service can compress turnaround time and improve accuracy. Learn more about how Fannie Mae and Freddie Mac condo requirements intersect with your closing workflow.