According to HousingWire, Fannie Mae is making significant changes to how it evaluates condo projects for conventional financing, with the biggest shift taking effect August 3. The most important change for markets like New York is that buildings will no longer qualify for the streamlined limited review process. Instead, every condo project will now go through a full review, which means lenders will take a much closer look at a building's budget, reserves, delinquency rates, and overall financial condition. This change affects older, densely populated buildings that dominate New York's inventory, and the Mortgage Bankers Association has warned that approval timelines will stretch during this transition, depending on how quickly a building's management can gather the documentation lenders require.
At the same time, Fannie Mae is raising the minimum reserve requirement from 10 percent to 15 percent of annual budgeted assessment income for full review applications dated on or after January 4, 2027. This means building boards will need to adjust their budgets, and savvy buyers should ask a building's managing agent where reserves currently stand before writing an offer. There's a silver lining though: Fannie Mae is eliminating the old 50 percent cap on investor concentration in established buildings, which should help some New York condos that previously had trouble getting financing approval due to too many investor owners. However, newly converted projects still need 50 percent of units conveyed or under contract to primary residence or second home buyers before financing is available.
A couple of other tweaks are worth noting. The exemption threshold for small buildings has changed from fewer than four units to fewer than 10 units, giving a bit more breathing room to smaller properties. Fannie Mae is also signaling that it may develop specific reserve guidelines for co-ops down the road, which historically haven't had the same standardized reserve requirements as condos. The takeaway for anyone involved in New York condo transactions is to plan ahead and ask the right questions early. What used to be a two-week preapproval could now take four to eight weeks, so getting documentation and reserve information before submitting an offer is crucial.
What I am seeing locally in the Bay Area and East Bay is that these Fannie Mae changes are starting to ripple across the country, though our market dynamics are somewhat different from New York's older inventory. Our newer construction and more recently built condos tend to have stronger reserve positions overall, but I'm already getting questions from clients about their building's reserve status and what the new standards mean for their timelines. If you're buying or selling a condo in Fremont or anywhere in the East Bay, I'd recommend having a direct conversation with your lender and the building's management early in the process to understand where you stand under these new rules.
