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Quick answer: On August 3, 2026 Fannie Mae and Freddie Mac end the Limited and Streamlined Review. Condo buildings with more than ten units now need a Full Review. The lender checks the association’s money, insurance and repairs. Buildings with ten units or fewer may skip project review entirely.
On Monday the fast track for condo financing goes away. The national coverage has been grim. Around here the story is more interesting, because the change cuts both ways. Which side you land on comes down to one thing. How many units are in your building.
Mike and Bobby recorded a short walkthrough, because this is easier to follow out loud than on paper.
What actually changes on August 3?
For years a buyer with a big down payment could finance a condo without the lender looking hard at the building. Fannie Mae called it the Limited Review. Freddie Mac called it the Streamlined Review. About 40 percent of condo deals used one of them.
Both end for loan applications dated August 3 or later.
A bigger down payment no longer shortens anything. Does the building have more than ten units? Then the lender runs a Full Review of the association. It does not matter how strong the buyer is.
The question moves from the buyer to the building. A perfectly qualified buyer can still fail to close because the association could not produce a document.
Does this hurt or help Greater Boston?
Both, and the split is sharper here than almost anywhere else in the country.
Our condo stock is unusual. We have the mid-rise buildings and the big developments. We also have a huge number of small conversions. Two and three unit homes turned into condos across Watertown, Somerville, Belmont, Dorchester and Cambridge. Brownstones carved into four or six units in the South End and Back Bay.
Those two groups just moved in opposite directions.
Ten units or fewer: this got easier
The Waiver of Project Review used to stop at four units. It now covers up to ten. A small building that qualifies skips project review completely. For the small conversions all over this market, that cuts weeks of chasing paperwork.
More than ten units: this got harder
Every conventional loan now triggers a Full Review. Reserves, insurance, late fees, lawsuits and open repairs all get checked. Mid-rises and larger developments carry the weight of this change.
So if you own in a six unit conversion in Watertown, this week is good news. Nobody is telling you that. If you are in a ninety unit building on the Cambridge line, the next sale there will look nothing like the last one.
The waiver has conditions
Small buildings do not get it automatically, and the conditions are not identical across the range.
Lender Letter LL-2026-03 draws a line at five units. For projects of five to ten units, the building cannot be part of a master association or a larger development. That restriction is written for that band specifically. Two to four unit projects, which is a great deal of what we have here, sit in the category that already qualified before this change.
Beyond that, the standing conditions in Selling Guide B4-2.1-02 still apply to any waived review. The project cannot carry an Unavailable status in Fannie Mae’s Condo Project Manager. It cannot be a condo hotel, houseboat or timeshare project. It cannot be terminating or in insolvency. And it has to meet the applicable insurance requirements.
What does a Full Review actually examine?
The lender stops looking only at the buyer. It starts looking at the association.
| What gets checked | What can fail it |
|---|---|
| Reserve funding | Below 10% of the budget now, below 15% from January 4, 2027 |
| Master insurance | Per unit deductible above $50,000, or coverage below replacement cost |
| Delinquencies | 15% or more of units 60 days or more behind |
| Litigation | Pending suits, particularly construction defect |
| Deferred maintenance | Open critical repairs, unresolved structural or safety work |
| Special assessments | Current, pending, or reasonably anticipated |
| Ownership concentration | One entity holding more than 20% of units in a project of 21 or more |
None of that is new to a lender. What is new is that they have to go looking for it on nearly every deal. And the answers come from boards and management companies. Those people do not work for the lender and are rarely in a hurry.
What is the 15 percent reserve rule?
Associations have long been asked to put at least 10 percent of the yearly budget into reserves. On January 4, 2027 that floor rises to 15 percent.
Fall below the line and the association can lose warrantable status. Conventional financing then disappears for every unit in the building. That is not a small thing. One law firm tracking this puts the value drop at somewhere between 5 and 30 percent.
There is a way around the flat 15 percent, and it has teeth
An association can lean on a professional reserve study instead of the flat percentage. Two conditions apply.
- The study has to be less than three years old.
- The budget has to fund at the highest recommended level in that study, not the minimum.
That second condition will catch people out. Reserve studies usually offer three funding tiers. Baseline, threshold and full. Plenty of associations picked baseline over the years to hold monthly fees down. Baseline is now banned outright, because it lets the reserve balance run toward zero.
What about the insurance deductible change?
This one landed quietly on July 1. We have not seen anyone here talking about it.
Does the master policy carry a per unit deductible above $50,000? Then the building can be treated as non warrantable. Where a per unit deductible applies, the buyer has to carry an HO-6 policy that covers at least that amount. The underwriter has to check it.
Insurance costs have jumped here over the last few years. A common fix was to raise the deductible and hold the premium down. That made sense at the time. It is now a financing problem, and most boards who did it have no idea.
Is this already happening, or does it start Monday?
Lenders are allowed to adopt the new standard early, and some clearly have.
That has a practical consequence. Two buyers writing on the same building in the same week can end up under different rules, depending on which lender they used and when the application was dated. It is worth asking your lender directly rather than assuming Monday is the switch.
It also means the questions a Full Review asks are already being asked. Under the old Limited Review, a lot of them never came up.
Reserves are not the whole test. An association can fund reserves well above the requirement and still lose a deal. Deferred maintenance is its own line in a Full Review. So is insurance. So is litigation. That is the part boards miss. The reserve percentage is easy to check and easy to be proud of. An open repair nobody has voted on yet is harder to see, and it stays invisible until a buyer is already under contract.
What should a buyer do differently now?
- Ask the unit count first. Ten or fewer changes the entire process. It is the single most useful question you can ask about a condo building right now.
- Ask for the association documents before you write, not after. Budget, reserve study, master insurance certificate, delinquency report, and any minutes discussing repairs.
- Ask your lender where they stand. Some adopted the new standard weeks ago. Their internal policy and your application date decide which rules apply to you.
- Build the timeline in. Full Review adds time, and the delay usually comes from the association rather than the lender.
- Understand what cash is worth now. A cash buyer skips project review entirely. In a building with open questions, that advantage has grown considerably.
What should a seller do?
Own in a building with more than ten units? Assume every buyer who needs a mortgage will trigger a review of your association. Get in front of it.
- Request the document package from management now rather than when a buyer asks.
- Find out the age of the reserve study and which funding tier the budget uses.
- Find out whether the master policy deductible clears the $50,000 line.
- If your association is in good shape, say so in the listing. A strong reserve percentage is now a selling point, not a footnote.
- If there is an open maintenance question, know the answer before a buyer’s underwriter asks it.
What should boards and owners do?
Three tasks. None of them takes long.
- Divide the reserve contribution in the budget by total operating expenses. If the answer is under 15 percent, you have until January to plan.
- Check the date on the reserve study. Older than three years and it no longer counts. Check which funding tier it uses while you are in there.
- Check the per unit deductible on the master policy against $50,000.
Then build a standing document package. Current budget, reserve study, master insurance certificate, late payment report and any lawsuits. Every sale in the building will need it. Having it ready saves weeks, and weeks are what deals die of.
Where does this leave the market?
Our honest read is that the effect here will be uneven, not uniform. It will show up first as delays, not as price.
Small conversions should get a little easier to sell. That matters more here than in most markets, because we have so many of them. Larger buildings will see longer timelines. They will also see more deals die in underwriting for reasons that have nothing to do with the buyer.
Which buildings feel it hardest? The ones with thin reserves, an old reserve study, a raised insurance deductible, or an open repair nobody has voted on. Some of those buildings do not know they are on that list yet. They will find out through a failed sale, which is the most expensive way to learn it.
Not sure which group you are in? The three checks above will tell you in an afternoon. Doing them now costs nothing. Doing them after an accepted offer costs a great deal more. If you want a second set of eyes on your building before you list, that is a conversation our team is glad to have.
Sources. Fannie Mae Lender Letter LL-2026-03 and Selling Guide sections B4-2.1-01, B4-2.1-02, B4-2.1-03, B4-2.2-02, B4-2.2-03 and B7-3-03. Freddie Mac Bulletin 2026-C. Reporting from National Mortgage Professional on the retirement of abbreviated project reviews. Value impact estimate on loss of warrantable status from KSN Law Firm. Agency guidelines change and lenders differ in how and when they implement them. Confirm current requirements with your lender before relying on any of this.
By Mike DelRose Jr. | DelRose McShane Team | Coldwell Banker Realty
REALTOR® · MA License #9515899 · 617.515.7715 · MikeJr@DelRoseMcShane.com
This article summarizes published agency guidelines for general information and is not lending, legal or tax advice. Consult your lender, attorney or association manager about your own situation.
