Federal financing news: Fannie Mae and Freddie Mac reset the rules for condo lending
First, the piece that’s easy to miss because it isn’t technically a law. Fannie Mae and Freddie Mac are the government-sponsored enterprises that together back roughly 70% of U.S. mortgages, and they just issued a coordinated Lender Letter, LL-2026-03, that resets reserve funding, insurance deductibles, and warrantability standards for condo and co-op associations nationwide.
That distinction matters. Minnesota didn’t pass this, no agency enforces it with fines, and technically it’s optional. But “optional” only holds up until an owner in your community tries to sell or refinance. A community that falls out of step becomes “non-warrantable,” and owners there end up stuck with non-warrantable loans: higher rates, bigger down payments, and fewer lenders willing to write the loan at all. A CAI Foundation survey found that 64% of non-warrantable communities report real harm to home sales or property values, and 42% of board members aren’t even sure whether their community currently qualifies for conventional financing.
Here’s the compliance timeline, in four dates:
- Now (encouraged): Lenders may begin applying the new standards immediately.
- July 1, 2026 (insurance): Master policy deductibles are capped at $50,000 per unit, and an HO-6 policy is required for any owner whose association carries a per-unit deductible on the master policy.
- August 3, 2026 (reserves): “Limited Review” status is eliminated, baseline reserve funding is prohibited, and associations must fund reserves at the highest recommended level.
- January 4, 2027 (the 15% rule): The minimum reserve allocation rises from 10% to 15% of the annual budgeted income.
If your community hasn’t had a reserve study in the last three years, or isn’t funding at the top recommended tier, this is the year to fix it. Better to catch it now than have a buyer’s lender flag it later.
Minnesota Senate File 1750: the most significant MCIOA rewrite in years
Second, and closer to home. Governor Walz signed SF 1750 into law on May 12, 2026, after it passed the Senate 56-9 and the House 100-34. It was sponsored by Sen. Eric Lucero (R-St. Michael) and Rep. Kristin Bahner (DFL-Maple Grove), and it’s widely considered the biggest rewrite of the Minnesota Common Interest Ownership Act (MCIOA) in years. Most of its substantive provisions, the ones below, don’t kick in until January 1, 2027. That’s a runway to prepare, not an excuse to wait.
Fines, fees & payments. Late fees are capped at the greater of $20 or 5% of the amount owed. Fines are capped at $100 per violation, with a written fine schedule required, and higher amounts are allowed only for certain violations, repeat offenses, or a majority owner vote. Interest on delinquent assessments is capped at 8%. Payments now have to be applied to assessments first, and associations can no longer refuse a partial payment before foreclosure.
Dispute resolution & owner rights. Any notice of violation or assessment now triggers a right to dispute, and owners can request a free “grievance” hearing, with the option to bring an attorney or representative. Associations can’t assess back their own attorney fees and costs without a formal resolution. Unit-alteration requests need a fair, written process with a decision inside 90 days. And retaliation against an owner for asserting these rights is now explicitly prohibited.
Rules and regulations. Boards must give 21 days’ notice and a comment period before adopting, amending, or revoking a rule, and every rule has to be “reasonable.” Temporary rules are still allowed in genuinely exigent circumstances.
Safe at Home compliance. If an owner discloses that they’re enrolled in Minnesota’s Safe at Home program, the association now has a statutory duty to protect that information. Disclosing it is a violation of MCIOA.
Board governance & contracts. Meeting agendas and contracts must be published in advance, owners get to speak, and the budget has to go out for review before adoption. No board member can vote on a contract where they or a family member has a financial interest. Contracts over $50,000 require three written bids, with affiliated bids disclosed. Post-transition management contracts become terminable on three months’ notice, with or without cause. Director terms are now capped at three years and must be staggered.
Collections & foreclosure. A written collection policy is required. Foreclosure can’t begin until an account is more than three months delinquent, and three notices, at least one by certified mail, are required before any referral.
Disclosure & resale. Resale certificates must now include any reserve study from the past three years, the fine schedule, the collection policy, deductible and wind/hail exposure, an HO-6 recommendation, and a standardized advisory that governing documents bind owners and can change.
A few narrower changes worth knowing: detached, single-family communities with no common elements can now dissolve with 67% owner approval; associations lose authority over parking in public rights-of-way the government maintains, and any delegated traffic-enforcement power is capped at five years; and for any HOA created on or after January 1, 2027, local governments can no longer condition development approval on forming one.
What boards should do now
Whether it’s the federal lending letter or the state law, the theme underneath both is the same: more transparency, on a clock. Five places to start:
- Audit your fine and late fee schedule. If it’s above the new $20/$100 caps, draft a revised policy now, and know exactly what triggers an exception or a hearing right.
- Adopt or update a written collection policy that builds in the three required notices, including certified mail, before any referral to a firm or agency.
- Revisit your meeting protocols: published agendas, published contracts, and time for owner comment.
- Review your vendor and bidding practices, especially the three-bid rule above $50,000 and affiliated-bid disclosures, and plan to retain bid records for six years.
- Check your Fannie Mae/Freddie Mac warrantability. Is your reserve study current within 36 months? Is your community funded at the highest recommended level?
None of this is optional, and very little of it is simple. It’s a lot of new process landing on boards that are often volunteers with full-time jobs elsewhere. That’s exactly why RowCal’s Community Managers exist. If you want a second set of eyes on where your association stands against these deadlines, that’s a conversation worth having now, while there’s still runway before January 2027.
This post summarizes general legislative and lending changes for informational purposes. It isn’t legal advice. For guidance specific to your association’s governing documents, talk with your attorney.