By CAI-RMC Editorial Committee 

On 3/18/2026, the two largest entities in the American mortgage market, Fannie Mae and Freddie Mac, announced significant updates to their lending standards.

Since these organizations back the majority of home mortgages in the United States, their rules influence whether a prospective buyer can secure a loan with favorable interest rates. To ensure a community remains a place where people can easily buy and sell homes, it is important to be aware of the new requirements.

For years, the industry standard for a "healthy" budget required associations to allocate at least 10% of their total annual budget toward Reserve funding. Effective January 4, 2027, Fannie Mae and Freddie Mac are increasing the threshold. 

To qualify for the most favorable lending rates, an association’s budget must now show a minimum transfer to Reserves of 15% of the total annual budget. Lenders want to see that communities are proactively allocating reserves for the ongoing deterioration of the roofs, siding, and mechanical systems, rather than relying on special assessments.

If an association seeks an exception to this threshold and believes they can properly fund their reserves with less than 15% of the total annual budget, the association must provide evidence from a recent (within 36 months) Reserve Study demonstrating that less funding is sufficient. 

However, keep in mind that lenders will no longer accept a "Baseline Funding" objective in a Reserve Study as evidence of financial sufficiency. "Baseline Funding" is often viewed as the bare minimum—the goal of simply keeping the reserve balance above zero. 

Instead, lenders now require associations to pursue the highest objectives outlined in their Reserve Studies. This demonstrates a commitment to funding reserves, if an association plans to transfer less than the 15% threshold. 

While these percentages might sound high, they align with reality. Industry data shows that to offset the ongoing deterioration of association components, most associations should transfer between 15% and 45% of their total budget to Reserves annually.

About the Author: This article was prepared by the Rocky Mountain CAI Editorial Committee and is based on publicly available information regarding the updated lending standards and reserve transfer guidance from Fannie Mae and Freddie Mac. It is intended for informational purposes only.