The 15% Reserve Test

How the test works

Fannie Mae measures reserves with one division: the budget’s annual reserve allocation divided by its annual budgeted assessment income. A building that collects $312,000 a year in regular assessments and budgets $37,440 to reserves is at 12%. The tool does the same division and compares the result with the two lines that matter for loan applications over the next few months.

It works out the gap two ways. If the board moves money from operating lines into reserves, income stays the same and the gap is 15% of income minus the current allocation. If the board raises dues and sends the increase to reserves, the increase also raises the income the 15% is measured on, so it takes a little more. In the $312,000 example, reaching 15% means moving $9,360 inside the budget, or raising dues by about $11,012 a year. Across 40 units that’s $19.50 or about $22.94 per unit per month. Each owner’s real share follows the CC&Rs, so treat the per-unit figures as averages.

The rule behind it

On March 18, 2026, Fannie Mae (Lender Letter LL-2026-03) and Freddie Mac (Guide Bulletin 2026-C) raised the minimum reserve allocation from 10% to 15% of annual budgeted assessment income. The 15% line applies to conventional loan applications dated on or after January 4, 2027, when the lender uses a Full Review. The application date is what counts, not the closing date: an application dated January 3, 2027 is tested at 10%.

Since August 3, 2026, every conventional loan in a building with 11 or more units gets a Full Review. The lighter Limited Review is gone. Freddie Mac also says an existing project approval has to be rechecked against the new rules for applications on or after the effective date, so a building that passed last year doesn’t carry the pass forward.

Fannie’s Selling Guide (B4-2.2-02, dated August 5, 2026) says what stays out of the income figure: special assessment income, income collected for owner utilities such as cable or internet, income allocated to reserve accounts, and incidental income the project doesn’t rely on. If the budget lumps those in with regular dues, take them out before you run the test.

The reserve study path

A lender can use a reserve study instead of the percentage, if the budget includes the study’s highest recommended reserve contribution. Since August 3, 2026, the baseline funding method (a plan that keeps the reserve balance just above zero) doesn’t count. Enter the study’s highest recommendation and the tool shows whether the budget meets it.

Buildings with 10 or fewer units

Since March 18, 2026, buildings of 2 to 10 units may qualify for Fannie Mae’s Waiver of Project Review or Freddie Mac’s Exempt from Review. In those buildings a conventional lender may not run this test at all. The building still can’t be flagged Unavailable by Fannie Mae, its master insurance still has to meet the rules, and a building of 5 to 10 units can’t be part of a master association.

Why the 2027 budget matters now

California HOAs on a calendar year have to send owners the annual budget between October 2 and December 1 (Civil Code 5300). For most LA buildings, that 2027 budget is the one a lender will read after January 4. If the reserve line is under 15%, the board can change it with a budget vote. It’s a line item, not a bank balance. Trade groups asked FHFA in July 2026 to delay the 15% rule by a year; we found no FHFA decision as of October 27, 2026.

What the test can’t tell you

• It reads the budget, not the bank account. A building can meet 15% with a thin reserve balance, or fall short with a healthy one.
• It checks one rule. A Full Review also covers critical repairs, special assessments, litigation, delinquency, commercial space, ownership concentration and insurance. The Lendability Checker covers those.
• Jumbo and non-QM lenders set their own reserve rules. Many mirror Fannie Mae and some are more flexible. Ask the lender.
• Lenders can add their own requirements (overlays) on top of Fannie Mae and Freddie Mac rules.

To see what the monthly payment looks like once dues change, run the Condo Carrying Cost calculator.

Sources

• Fannie Mae Lender Letter LL-2026-03, Updates to Project Standards and Property Insurance Requirements, March 18, 2026: singlefamily.fanniemae.com
• Freddie Mac Guide Bulletin 2026-C, Selling and Servicing Updates, March 18, 2026
• Fannie Mae Selling Guide B4-2.2-02, Full Review Process, dated August 5, 2026: selling-guide.fanniemae.com
• California Civil Code 5300 (annual budget report): leginfo.legislature.ca.gov
• Delay request by CHLA, CAI and NAMB, July 8, 2026, reported by Scotsman Guide, July 9, 2026

General information about condo lending rules as of October 27, 2026, not legal or lending advice. Fannie Mae, Freddie Mac and individual lenders change their rules, and lenders apply their own overlays. Only a lender’s review decides whether a loan in a specific building works. Confirm with your lender and the HOA’s manager.