What January 4, 2027 means if you are buying an LA condo

The 15% reserve rule starts on January 4, 2027, and for a buyer it works like a second appraisal: this one of the building's budget instead of the unit. From that date, a conventional loan in most LA condo buildings over 10 units needs the association to budget at least 15 percent of its dues income to reserves, up from 10 percent. This post covers which buildings and loans the rule reaches, what it does not do, and what to ask before an offer.

What the rule says, and the date that counts

Fannie Mae announced the change in Lender Letter LL-2026-03 on March 18, 2026, and Freddie Mac published the same change in Bulletin 2026-C that day. Under a Full Review, the association's budget must allocate at least 15 percent of its annual budgeted assessment income to reserves. Fannie applies it to loan applications dated on or after January 4, 2027. Freddie uses the application received date.

Two details decide most cases:

• The application date, not the closing date. A loan application dated December 20 is reviewed at 10 percent even if escrow closes in February.
• No grandfathering. Freddie says an unexpired project review done before the effective date still has to be checked against the new rules for applications received after it. A building that passed in October can be tested again in January.

As of October 27, 2026, we found no decision by FHFA to delay the date. Trade groups asked for a one-year delay in June and July, and an FHFA spokesperson told HousingWire in June that the companies were implementing on time. We will update this post if that changes.

Which buildings it reaches

The 15 percent line applies inside a Full Review. Since August 3, 2026, Fannie has required a Full Review for established buildings of 11 or more units, because the lighter Limited Review was retired. Buildings of 10 or fewer units can usually use a Waiver of Project Review instead, and the reserve test does not apply to them. Buildings of 5 to 10 units qualify only if they are not part of a master association.

In our database, 3,712 LA buildings have a known unit count. Of those, 1,434 have 10 or fewer units and 2,278 have 11 or more (as of October 27, 2026). A 10-unit building like The Rexford in Beverly Hills sits on one side of the line. Wilshire Regent (208 residences, 1963) and The Seychelle in Santa Monica (93 residences, 2014) sit on the other, as do most towers on the Wilshire Corridor and in Century City.

A waiver is not a free pass. Even a small building cannot be flagged "Unavailable" in Fannie's system, and its insurance still has to meet the rules.

Which loans it touches at $800,000 and up

The 2026 conforming loan limit for a one-unit home in LA County is $1,249,125. With 20 percent down, that covers a purchase up to about $1.56 million. In that band, conforming and high-balance loans follow the Fannie and Freddie project rules directly, so this is where the 15 percent line bites hardest.

• Conventional conforming and high-balance: the rule applies as written to Full Review buildings.
• Jumbo: above $1,249,125, the lender's investor sets the condo rules. Many follow Fannie-style standards. Whether a given jumbo program adopts the 15 percent line is that investor's call, so ask.
• Non-QM and portfolio: built for buildings outside agency rules. As one example, UWM's expanded non-warrantable condo program (HousingWire, September 16, 2026) asks for a reserve study only when the reserve allocation is below 3 percent. Terms change often.
• Cash: no project review at all, though the budget still shows up later in dues and in who can buy from you.

Our pillar on how the 2027 condo loan rules hit each loan type has the full comparison, and warrantable vs non-warrantable explains the terms lenders use.

What the rule does not do

It is a budget line, not a bank balance. The test divides the budgeted reserve contribution by budgeted assessment income. Special assessment income and money collected for owners' cable or internet are left out. A board can pass by adopting a budget that moves the number, which is why the 2027 budgets going out to owners now matter so much.

A building can also qualify through its reserve study instead of the percentage, if the study is less than three years old, independent, and the budget funds the study's highest recommended contribution. Since August 3, 2026, the lower "baseline" funding level no longer counts.

And it does not mark a building permanently. A project that fails in January can pass in March after a budget amendment. Lenders review loan by loan, so the answer is always "as of" a date.

What to ask before you write an offer

1. Count the units. Ten or fewer usually means a waiver path. Eleven or more means a Full Review.
2. Ask for the 2027 budget. Calendar-year associations must send it to owners between October 2 and December 1, 2026. Find the reserve contribution line and divide it by total assessment income.
3. Ask for the reserve study and compare its top recommended contribution with what the budget funds.
4. Ask your lender to review the building at the start, and keep your loan contingency until it has approved the project.
5. If the building falls short, ask the lender what jumbo, portfolio or non-QM terms look like there before you decide.

The other reasons a building fails a Full Review did not change: unfunded critical repairs over $10,000 per unit, a failed mandatory inspection, safety litigation, more than 15 percent of units 60 days behind on dues, and a few others in Selling Guide B4-2.1-03. Our condo buyer checklist lists every document, and our guide to reading an HOA budget shows where the reserve line sits. If you are relocating and still weighing whether to buy at all, the rent vs buy breakdown for Los Angeles runs the numbers, and Tyler's offer guide covers how contingencies fit into an LA offer.

To see where a specific building stands before you fall for a unit, start a building check.

Common questions

Does the 15% reserve rule apply to my loan if I close after January 4, 2027?

The date that counts is the loan application date, not the closing date. Fannie Mae applies the 15 percent test to Full Review loan applications dated on or after January 4, 2027, and Freddie Mac uses the application received date. An application dated earlier is reviewed under the 10 percent rule, although lenders can apply their own overlays.

Does the 15% reserve rule apply to jumbo loans?

Not by law. Jumbo loans above the $1,249,125 LA County limit for 2026 are not sold to Fannie Mae or Freddie Mac, so their project rules do not bind the lender. Many jumbo investors follow Fannie-style standards anyway, and each one decides whether to adopt the 15 percent line. Ask the lender directly.

Is a building that fails the 15% test off limits to buyers?

No. It means a conventional conforming or high-balance loan generally cannot close there until the budget meets the test or the reserve study path applies. Buyers can still use cash, or a jumbo, portfolio or non-QM lender that accepts the building, usually with a larger down payment and a higher rate.

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.