New Fannie Mae/Freddie Mac Lending Guidelines Take Effect

Starting August 3, 2026, the newly tightened Fannie Mae and Freddie Mac lending guidelines began to take effect. Residential mortgage lenders will be required to look much more closely at the financial and physical health of common interest community (CIC) associations before approving conventional mortgages.

The following changes apply for loan applications that are dated on or after August 3, 2026:

• The old “limited review” shortcut (which sometimes allowed CICs to “slip through the cracks”) is essentially gone; all loans will now require a full project review.
• Lenders will examine condo/HOA association budgets, reserve funding levels, insurance, delinquencies, special assessments, litigation, and deferred‑maintenance or structural issues.

Associations that are underfunded or underinsured (among other deficiencies) will be deemed ineligible for conventional financing, reducing the pool of buyers and affecting resale values.

Additionally, the new regulations provide:

• Minimum reserves for many full‑review projects are rising from 10% to 15% of the annual budget (although this requirement does not begin until early 2027).
• If a lender relies on an association’s reserve study, its budget must follow the highest recommended reserve contribution in that study; minimal funding options are no longer acceptable.
• Reserve studies must be current (no more than about three years old), and funding must match the study’s recommendations.

New Jersey’s aging condo infrastructure, rising insurance costs, and detailed disclosure framework mean these national rules will hit NJ communities hard. Boards that have delayed obtaining reserve studies and kept association dues artificially low may find that buyers will struggle to secure loans for units. Similarly, there is heightened scrutiny of financial and engineering disclosures. Lender Questionnaires are now a risk-screening tool that may preclude loans in certain communities rather than just a routine form filled out during a unit sale.

Stark & Stark is well versed in the new lending guidelines and can help boards and managers navigate these new requirements. We can, among other things:

• Review budgets, reserve studies, and governing documents for Fannie Mae/Freddie Mac compliance and eligibility.
• Align questionnaires and disclosures so lender responses are accurate and protective of the association; and
• Work with reserve professionals and engineers on practical funding and maintenance plans.

If your board would like a NJ‑specific check‑up of your budget, reserve study, insurance, and lender questionnaires considering these changes, please contact our office. A brief review now can help keep financing available and preserve unit values after August 3, 2026.