The 2027 HOA budget window and the 15% reserve line, line by line

The Fannie Mae condo reserve calculation is one division, and LA boards are setting both numbers in it right now. Calendar-year associations have to mail their 2027 budget reports by December 1, 2026, and from January 4, 2027 a conventional lender running a Full Review will test that budget at 15 percent. This post works through what goes on top of the fraction, what goes underneath, and what is left out.

The fraction a lender runs

Fannie Mae's Full Review rules (Selling Guide B4-2.2-02, dated August 5, 2026) set the test: the annual budgeted reserve allocation divided by the annual budgeted assessment income. Today the result must be at least 10 percent. For loan applications dated on or after January 4, 2027, it rises to 15 percent under Lender Letter LL-2026-03, and Freddie Mac made the same change.

Four kinds of income are left out of the bottom number:

• incidental income the association does not rely on to operate,
• money collected for owners' utilities such as cable or internet,
• income allocated to reserve accounts,
• special assessment income.

That last exclusion matters. A building cannot meet the test by levying a one-time assessment and counting it. Habitat Magazine made the same point in its September 2026 explainer.

A worked example

These figures are an example, not any real building. Say an association of 100 units budgets $1,200,000 in regular assessments for 2027, and its budget puts $144,000 into reserves.

• $144,000 divided by $1,200,000 is 12 percent. That passes today and fails for applications from January 4.
• Fifteen percent of $1,200,000 is $180,000. The gap is $36,000 a year, or $3,000 a month.
• Spread across 100 units, that is $30 a month per unit if the board moves money from operating lines, or roughly that much in added dues if it raises assessments instead.

Raising dues changes the bottom number too, so the arithmetic is slightly different in practice. The point stands: for many buildings the fix is a budget decision measured in tens of dollars per unit per month, not a capital campaign. For buildings with large deferred repairs, the reserve study will usually call for far more than 15 percent anyway.

The other way to pass: the reserve study

A lender may use the reserve study instead of the percentage. Three conditions apply under B4-2.2-02: the study was completed within three years of the lender's review, it was done by an independent party with reserve study expertise, and the budget includes the study's highest recommended reserve allocation. Since August 3, 2026, the "baseline" funding method (keeping the projected balance just above zero) no longer qualifies.

So a board whose study recommends 13 percent can pass with 13 percent, provided the 13 is the study's top recommendation and the budget funds all of it. A board funding a study's lower option cannot.

Why the 2027 budget is the one that counts

Civil Code 5300 requires the annual budget report 30 to 90 days before the fiscal year ends. For an association on the calendar year, the window runs from October 2 to December 1, 2026. The report includes the pro forma budget, a reserve summary, the reserve funding plan, any anticipated special assessments, and an insurance summary. The Assessment and Reserve Funding Disclosure Summary required by Civil Code 5570 adds the percent funded.

The budget adopted now is the one a lender will read in January, February and March. Whether a building has 117 residences like Montana Terrace in Brentwood, 296 like Oak Pointe in Sherman Oaks, or 317 like Ocean Towers in Santa Monica, if its fiscal year matches the calendar year, its board is deciding the 2027 reserve line this fall. We have not seen those buildings' 2027 budgets and are not describing them.

Boards have limits. Under Civil Code 5605, raising regular assessments more than 20 percent over the prior year, or levying special assessments above 5 percent of budgeted gross expenses in a year, needs a member vote, with narrow emergency exceptions. Most buildings closing a 3-point gap will not come near those limits.

Two different 15 percents

California's new reserve law uses the same number for a different test. AB 2050 (Chapter 796, signed September 29, 2026) applies from January 1, 2032. If an association's 30-year reserve projection goes below zero, it must transfer at least 15 percent of its gross annual budget into reserves each year until it no longer does. Our post on the new HOA laws for 2027 covers it in full.

Fannie's line compares reserves with assessment income and applies loan by loan from 2027. AB 2050's line compares reserves with the whole budget and applies only to underfunded associations, from 2032. A building can pass one and fail the other.

What owners can do with this

1. Find the reserve contribution in the 2027 budget and divide it by total regular assessment income.
2. Compare it with the reserve study's highest recommended contribution.
3. If either test looks short, ask at the budget meeting whether the board considered the January 4 date.

Our guide to reading an LA condo HOA budget shows where each line sits, the 2027 reserve requirements pillar covers the rule in depth, and board members can start with the HOA board brief. Buyers can find the same questions in our buyer checklist.

If rising dues are part of a bigger decision about staying, our sister site lays out what LA condo equity buys elsewhere. If you are moving to LA and comparing monthly costs, the LA cost of living guide puts dues in context. And to check where your own building stands, request a building check.

Common questions

How is the Fannie Mae condo reserve percentage calculated?

The lender divides the annual budgeted reserve allocation by the annual budgeted assessment income. Special assessment income, income collected for owners' utilities such as cable or internet, incidental income the association does not rely on, and income allocated to reserve accounts are left out of the income figure. From January 4, 2027, a Full Review needs at least 15 percent.

When does a California HOA have to send its 2027 budget?

Civil Code 5300 requires the annual budget report 30 to 90 days before the end of the fiscal year. For an association on a calendar year, that is between October 2 and December 1, 2026. The report includes the pro forma budget, the reserve summary and any anticipated special assessments.

Is the Fannie Mae 15% the same as the AB 2050 15%?

No. Fannie Mae's 15 percent compares the reserve line with budgeted assessment income, and it applies to Full Review loan applications from January 4, 2027. AB 2050's 15 percent, from January 1, 2032, applies only to associations whose 30-year reserve projection goes negative, and it is measured against the gross annual budget.

This article is general information, not legal, tax, insurance or lending advice. Laws and bill statuses change, and how a rule applies depends on the building and its governing documents. Confirm anything that affects a decision with your association’s counsel, a CPA, an insurance broker or your lender. Building figures are from the Condos of LA database.