Fannie Mae condo reserve requirements come down to one budget test, one study alternative, and one repair standard. Three numbers circulate online and they measure different things. This guide separates them from the primary source, and shows how URBI keeps the evidence a lender asks for in one place.
Is the Fannie Mae condo reserve requirement 10 percent or 15 percent?
Both, on different dates, and only when the lender uses the Full Review process. The percentage is an annual budget test, not a bank balance. Fannie Mae's Selling Guide says the lender must divide the annual budgeted replacement reserve allocation by the association's annual budgeted assessment income, which includes regular common expense fees. The current Full Review standard is at least 10 percent of the budget.
The denominator is not every dollar the building collects. The Guide lets the lender exclude incidental income the project does not rely on, utility income an owner would normally pay directly, income already allocated to reserves, and special assessment income.
The 15 percent figure is real, but scheduled. Fannie Mae's Lender Letter LL-2026-03 raises the minimum from 10 percent to 15 percent of annual budgeted income assessment, for Full Review loan applications dated on or after January 4, 2027.
| Number | What it measures | Where it comes from |
|---|---|---|
| 10 percent | The current annual budget allocation test under Full Review | Selling Guide, section B4-2.2-02 |
| 15 percent | The same test, for Full Review applications dated on or after January 4, 2027 | Lender Letter LL-2026-03 |
| 70 percent funded | A reserve study measure of your balance against its fully funded balance | Reserve study practice, not a Fannie Mae threshold |
One more date matters. LL-2026-03 also retired Limited Review, so established projects that qualified for it now face Full Review, or a Waiver of Project Review where one applies. That is why boards are already being asked for records.
What does percent funded mean, and does Fannie Mae require 70 percent?
Percent funded is a balance sheet measure from your reserve study, and Fannie Mae does not set a 70 percent threshold. It compares the money you hold against what the study says you should have accumulated by now. It says nothing about this year's contribution.
The number comes from reserve study practice. Association Reserves reported in November 2025 that across more than 100,000 reserve studies prepared between 1986 and 2025, 74 percent of associations were less than 70 percent funded, and it treats below 70 percent as the point where an association becomes underfunded. That is an industry benchmark, not a Selling Guide rule.
This is where boards get caught. A building can hold a healthy balance and still fail Full Review because its annual contribution is too low. Another can contribute the full percentage yearly and sit far from fully funded. The two numbers move independently, which is why the reserve fund and operating fund split matters in your books.
When can a reserve study replace the percentage calculation?
A reserve study can replace the percentage calculation when it is recent, independent, and actually funded by the budget. The Selling Guide sets the conditions plainly.
- The study, or an update, must be completed within three years of the date the lender approves the project.
- An independent third party with reserve study expertise must prepare it. The Guide names a credentialed reserve study professional, a construction engineer, and a CPA specializing in reserve studies.
- It must cover each major component's condition and remaining useful life, repair and replacement costs, annual contributions, existing funded reserves, and a funding plan.
- Funded reserves must meet or exceed the study's recommendations.
- The budget must include the highest recommended reserve allocation amount in the study.
That last line is the one boards underestimate. The study route is not a way to fund less, and it can demand more than the percentage would. LL-2026-03 also closed an escape hatch: for applications dated on or after August 3, 2026, lenders may no longer use the baseline funding method, which lets a reserve balance approach but never fall below zero.
How do critical repairs and deferred maintenance affect eligibility?
Critical repairs can make a project ineligible no matter how well the reserve line is funded. Fannie Mae's ineligible projects section defines them as repairs or replacements that significantly impact the safety, soundness, structural integrity, or habitability of the buildings.
- They include unfunded repairs above a stated per unit cost threshold due within the next 12 months.
- Named examples include mold, water intrusion, damaging leaks, advanced physical deterioration, seawalls, elevators, balconies, foundations, and parking structures.
- Routine repairs are not critical. The Guide describes routine work as preventative in nature or part of normal capital replacements.
- The lender must obtain any structural or mechanical inspection completed within three years of its review date. If that report shows unaddressed critical repairs, the project is ineligible until they are completed and documented.
Fannie Mae says why it tightened both at once. LL-2026-03 cites a correlation between projects with underfunded capital reserves and those needing critical repairs.
Two common assumptions are wrong. A special assessment does not substitute for the reserve allocation: the Project Standards FAQ says special assessments cannot be used in lieu of the budget reserve allocation, and that where one relates to safety or structural integrity, all related repairs must be fully completed. A failed review is also not a ban on lending. The consequence is narrower: loans on units are not eligible for sale to Fannie Mae. The general project standards let a lender request an exception, and say loans are eligible for delivery once the project complies.
What documentation do lenders ask boards for?
Lenders ask for the records that prove the budget, the study, the repairs, and the decisions behind them. The Guide lists project budgets, financial statements, and reserve studies among project documentation, and makes the lender responsible for determining what it needs. That is why two lenders can ask one building for different things.
Form 1076 is optional, but its questions show what a lender is establishing: whether a reserve study was completed within the past three years, current reserve balances, whether the last inspection had findings on safety or structural integrity, whether a funding plan and schedule exist for deferred maintenance, special assessments, owners 60 or more days delinquent, litigation, and association loans.
Notice what that list really is: a request for your governance record. The ineligible projects section names board meeting minutes, engineer reports, inspection reports, and reserve studies among acceptable documentation. David Fitzhenry, a partner at Moritt Hock & Hamroff, told Habitat Magazine in 2026 that for boards "it's going to be another shock."
How does URBI help a board keep the evidence trail ready?
URBI keeps the board's evidence trail in one system, so producing it takes hours instead of weeks. That is the part of this problem software can solve.
- Document hub. Bylaws, minutes, budgets, AGM packages, and reserve fund summaries in one place, with search that reads document contents, not just titles. That is the difference between finding an old engineer report in a minute and emailing three former board members.
- Board decisions and votes with a permanent audit trail. Decisions move through a real status workflow, votes are recorded per member, quorum is tracked automatically, and votes on vendor proposals tie to the proposal. When a lender asks when the board approved the garage repair, the record answers.
- Service ticket history. Every repair carries photos, subtasks, vendor assignment, and a full activity log, so the repair history shows what was reported, who did it, and when it closed.
- Owner communications with tracked delivery. Notices go out by push and email, the platform tracks who saw each post, and documents attach to it.
- Accounting, in beta. A general ledger, budgets, forecasts, and audit logs, so the reserve contribution line sits beside the operating budget and the financial statements a lender asks for.
Two limits, stated plainly. URBI does not produce reserve studies, and URBI does not determine lender eligibility. A qualified professional writes the study and the lender decides whether the project qualifies. URBI holds the evidence both of them ask for.
Requirements vary by jurisdiction and by lender, and boards should confirm their own position with their counsel and their lender. State law can be stricter. In Florida, the 2025 statutes require a structural integrity reserve study at least every 10 years for residential condominium buildings three habitable stories or higher, and bar certain owner controlled associations from voting to underfund listed items in budgets adopted on or after December 31, 2024. The Selling Guide requires any study a lender relies on to meet or exceed state statutes.
Frequently asked questions
Does Fannie Mae require a 15 percent reserve allocation right now?
Not yet. Lender Letter LL-2026-03 sets the minimum at 15 percent of annual budgeted income assessment for loan applications dated on or after January 4, 2027, and only where the lender uses Full Review. Before that date the standard is at least 10 percent. Boards building a 2027 budget should plan against the higher figure now.
Is 70 percent funded a Fannie Mae requirement?
No. Percent funded compares your reserve balance to its fully funded balance, and it is a reserve study metric. Fannie Mae's study alternative asks something different: that funded reserves meet or exceed the study's recommendations, and that the budget include its highest recommended allocation. Below 70 percent funded is an industry benchmark, not a Selling Guide threshold.
Does every condo building now face a Full Review?
No. LL-2026-03 expanded eligibility for a Waiver of Project Review to new and established projects with ten or fewer units, and projects of five to ten units must not be part of a master association or larger development. Larger projects that previously used Limited Review now face Full Review. Ask your lender which path applies.
If your owners are selling or refinancing, the question is not whether your reserve percentage is right. It is whether you can prove it on the day a lender asks. That is what URBI keeps ready for residential buildings, and the same record makes running the board easier all year. Email hello@myurbi.co to see it.
