Weldon L. Brown Co, Inc.

04/08/2026

03/25/2026

Fannie Mae and Freddie Mac Just Changed the Rules for California Condos: What Buyers and Owners Need to Know -

On March 18, 2026, Fannie Mae and Freddie Mac published coordinated updates to their condo eligibility guidelines, introducing the most significant changes to condominium financing in years. Fannie Mae's Lender Letter LL-2026-03 and Freddie Mac's Bulletin 2026-C, issued in coordination with FHFA, affect everything from how small condo projects qualify for conventional financing to how much your HOA must set aside in reserves.

For California condo buyers and owners, these changes carry both good news and potential challenges. The relaxation of investor concentration limits will help many urban buildings regain financing eligibility. But the upcoming reserve requirement increases may pressure HOAs to raise assessments or impose special assessments to comply.

This post breaks down every condo-related change, explains the California-specific implications, and provides practical guidance for buyers navigating condo purchases in 2026 and 2027.

r/CaliforniaMortgages - Fannie Mae and Freddie Mac Just Changed the Rules for California Condos: What Buyers and Owners Need to Know
Why These Changes Matter
When a condo project is "non-warrantable" (meaning it doesn't meet Fannie Mae and Freddie Mac guidelines), buyers face limited financing options. They're typically restricted to portfolio loans, jumbo products, or cash purchases. This usually means higher interest rates, larger down payments, and reduced buyer pools, all of which depress property values.

California has a particularly large condo inventory, and many buildings have struggled with warrantability issues since the GSEs tightened requirements following the 2021 Champlain Towers South collapse in Florida. These new changes attempt to balance ongoing safety concerns with practical market realities, particularly around investor concentration and reserve funding.

The Major Condo Eligibility Changes
1. Waiver of Project Review Expanded to 10 Units
Previous rule: Waiver of Project Review (the simplest approval path) was limited primarily to detached condos and very small attached projects.

New rule: Projects with 10 or fewer units now qualify for Waiver of Project Review, including both new and established projects.

Conditions for 5-10 unit projects:

Cannot be part of a master association or larger development

Must meet all applicable insurance requirements

No critical repairs or evacuation orders (for Fannie-to-Fannie limited cash-out refinances)

Project cannot be in "Unavailable" status in Condo Project Manager (CPM)

What this means for California: Many smaller condo buildings throughout the state, particularly older 2-4 unit conversions and small urban infill projects, now have a streamlined path to conventional financing. The lender doesn't need to complete a full project questionnaire or verify reserve funding levels for these properties.

Reduced insurance requirements: Per Selling Guide B7-4-01, General Liability insurance and Fidelity insurance are NOT required for condo projects that qualify for a Waiver of Project Review. This can be a significant cost savings for small HOAs. However, Master Property (hazard) insurance covering the building and common elements is still required under B7-3.

Watch out for mixed-use buildings: The 10-unit waiver won't help if your building has ground-floor retail or commercial space. If commercial space exceeds 35% of total square footage (Fannie Mae) or 25% (Freddie Mac), the waiver doesn't apply and the project requires Full Review regardless of unit count. This is common in urban California buildings with street-level storefronts.

Effective date: Immediately available to lenders.

2. Limited Review Process Being Retired
Previous rule: Established condo projects could qualify through three review methods: Full Review, Limited Review, or Waiver of Project Review. Limited Review had fewer documentation requirements than Full Review but more than Waiver.

New rule: The Limited Review process is being eliminated entirely. Projects must now qualify through either Full Review or Waiver of Project Review.

A note on terminology: Fannie Mae calls this "Limited Review" while Freddie Mac calls the equivalent process "Streamlined Review." Both are being retired simultaneously. Going forward, both agencies will use only two pathways: waiver (for small projects) or full review (for everything else).

Timeline:

Lenders may implement immediately

Mandatory retirement date: August 3, 2026 (all loan applications dated on or after this date)

What this means for California: Most established condo projects that previously used Limited Review will now require Full Review, which means more documentation, more HOA financial scrutiny, and verification of reserve funding levels. However, projects with 10 or fewer units may shift to the simpler Waiver process instead.

Industry impact: According to the Community Associations Institute, approximately 40% of current condo reviews use the Limited Review pathway. The retirement of this option will require lenders to gather significantly more documentation for every loan in affected projects, potentially extending approval timelines.

3. 50% Investor Concentration Limit Retired
This is perhaps the most significant change for California's urban condo market.

Previous rule: Established condo projects reviewed under Full Review could have no more than 50% of units owned by investors (non-owner-occupants) when financing an investment property loan. Exceeding this threshold made the entire project non-warrantable for investor loans.

New rule: The 50% investment property concentration limit has been retired for established projects under Full Review.

Critical distinction for new projects: The 50% presale requirement for NEW and NEWLY CONVERTED condo projects still applies. At least 50% of total units must be conveyed or under contract to principal residence or second home purchasers before investor loans can be approved. This protects against speculator-heavy new developments.

What this means for California: Many established urban condo buildings in Los Angeles, San Francisco, San Diego, and other major metros have investor ownership exceeding 50%. These buildings have been effectively locked out of conventional financing for investment property purchases, forcing buyers into portfolio loans or pushing them toward different properties entirely.

With this restriction removed for established projects, a significant number of California condo buildings should regain warrantable status for investor loans, assuming they meet other requirements (insurance, reserves, no critical repairs, etc.).

Effective date: Immediately available to lenders.

4. Reserve Requirements Increasing from 10% to 15%
While some requirements are relaxing, reserve funding standards are tightening.

Previous rule: The HOA must allocate at least 10% of its operating budget to replacement reserves for capital expenditures and deferred maintenance.

New rule: The minimum reserve allocation increases to 15% of the HOA's operating budget.

Effective date: Loans with application dates on or after January 4, 2027.

What this means for California: HOAs currently budgeting exactly 10% for reserves will need to increase their allocation by 50% (from 10% to 15%) to maintain warrantable status. For many associations, this will require either:

Increasing monthly assessments

Reducing operating expenses elsewhere in the budget

Imposing special assessments to boost reserve balances

Important clarification: Underwriters calculate this percentage based on the replacement reserve line item relative to gross operating expenses, not total assessment collections. Special assessments and pass-through charges can skew the math if you're comparing to total assessments collected.

California's Davis-Stirling Act (Civil Code §5550) already requires reserve studies, but the funding levels recommended in those studies don't always align with GSE percentage-based requirements. Boards should review their current reserve allocation against the new 15% threshold now, even though the requirement doesn't take effect until 2027.

5. Reserve Study Standards Strengthened
Beyond the percentage increase, both GSEs are also tightening requirements around reserve studies themselves.

New requirements:

Reserve studies must be current (completed within 36 months prior to the loan application date)

The HOA must follow the highest recommended funding level identified in the reserve study

Baseline and threshold funding methods are no longer acceptable

What "highest recommended funding level" means: Reserve studies typically present multiple funding scenarios. Some associations choose the minimum "baseline" approach, which funds only what's immediately necessary. The GSEs are now requiring associations to follow the most robust funding recommendation, not the bare minimum.

Effective date: Lenders may implement immediately but must do so for all loan applications dated on or after August 3, 2026.

What this means for California: If your HOA's reserve study recommends full funding but the board has been following a baseline or threshold approach, the project may become non-warrantable under the new rules. This is particularly relevant for older California condo buildings with significant deferred maintenance backlogs.

03/14/2026

2026 CACM Law Seminar & Trade Show, Disneyland Hotel - Great 2 days getting education on new laws and networking with industry professionals. Looking forward to next year.

11/26/2025

Wishing you a Happy Thanksgiving
Thanksgiving is a great American tradition that encourages everyone to slow down, reflect on the past year, and appreciate all that is truly important in our lives. As I think about our good fortune, I am reminded of how much I value the relationship with our clients. I am very thankful for the opportunity to help our clients achieve their associations goals... All our best to you and your families...
Happy Thanksgiving
WELDON L. BROWN COMPANY, INC

10/16/2025

Great luncheon with business professionals and discussion by the speakers on the state of the insurance industry. Very informative.

08/08/2025

Congratulations to Kathy Cabrera for achieving the Certified Community Association Manager, CCAM designation from the California Association of Community Managers. At Weldon Brown Company, we are dedicated to professionalism, code of ethics and a standard of care.

08/01/2025

ARTIFICIAL TURF -

Common Area Turf. Many owners and boards of directors are considering synthetic grass for water conservation and to reduce maintenance. Artificial turf varies considerable in manufacturing quality, life, and durability. Associations should adopt guidelines if they intend to allow the installation of artificial turf so the finished product looks like actual grass.

Negatives. Before installing large areas of artificial turf associations and individual members must consider the negative aspects such as (i) unresolved toxicity concerns, (ii) surface temperatures that can soar to 200º, and (iii) sanitation problems when dogs relieve themselves on it. Another caution concerns trees. When artificial turf is installed, sprinklers are turned off. That could negatively impact trees. Owners need to make sure trees are sufficiently watered.

Local Rebates & Restrictions. Some water districts are offering rebates to encourage the installation artificial turf. Boards need to check local ordinances before authorizing artificial grass to see if local authorities have imposed restrictions.

Homeowner Turf. Civil Code § 4735(a) makes void and unenforceable any provision in an association's governing documents that prohibits artificial turf or any other synthetic surface that resembles grass. It also prohibits HOAs from requiring the removal of artificial turf and water-efficient landscaping installed in response to the current drought emergency.

Guidelines. If associations authorize artificial lawns, they need to develop guidelines to ensure realistic looking turf is installed. Boards should address the following issues:

Color. Turf comes in 1-, 2- and 3-color options. Three-color turf provides the most realistic looking grass.

Color Retention. The colors in artificial grass will fade over time because of exposure to UV sunlight. Nylon tends to break down faster than other materials and should be avoided. Find out what the rate of color loss is for the product. Does it warranty the product?

Pile and Weight. Like carpet, higher pile turf gives a richer more realistic appearance. The higher the face-weight of the product, the better the product's appearance. Turf in the 20 to 30 face-weight is less desirable than products in the 40 to 60 face-weight range.

Toxic Materials. Turf manufactured with nylon typically incorporates lead into the manufacturing process to keep the color from fading. Avoid any materials, including infill products, that use lead or any other heavy metal materials.

Permeability. Water needs to drain through the product. Some products have holes in the backing to allow water to drain through the product. The problem with holes is that they become clogged over time. Boards should prescribe products with completely permeable backings so that drainage through the turf is uniform and complete.

Water Absorption. Associations should avoid products that absorb water (another problem with nylon). If the product absorbs water, that means it absorbs pet urine. This creates odors and discoloration.

Infill Materials. Ask about the infill materials. Once the artificial turf is installed, infill is used to make the turf stand up. Require in-fill that does not absorb urine, that does not raise the temperature of the product (such as rubber), and does not contain heavy metals.

Base and Drainage. Artificial turf cannot be installed over the top of existing grass. Sod and dirt must be removed and an aggregate base and soil stabilization fabric installed to allow for proper drainage. Boards should consult with installers and develop requirements for base materials.

08/01/2025

We have office space available in our prestigious building. Great location in Canyon Crest Area of Riverside. Come be a tenant in the Tudor Professional Building.

5029 La Mart Dr, Riverside, CA 92507. This Office space is available for lease. The Tudor Professional Building is located in Riversides exc

07/15/2025

ASSOCIATION FINES / PENALTIES CAPPED AT $100!!!

The Legislature in Sacramento seems to specialize in bad legislation. A bill that was signed into law on Monday and went into effect yesterday is truly awful. The bill changes disciplinary procedures effective immediately.

Moving forward, boards cannot impose fines more than $100 per violation. If an association’s fine schedule has penalties less than $100, the lesser amount must be used.

Written Findings. The statute makes an exception if the violation would result in an adverse health or safety issue on the common area or another member’s property. The Legislature then complicated matters by requiring boards to make a written finding specifying the adverse health or safety impact in a meeting open to members. For example, if a resident smokes pot in his unit creating a health issue for the young couple next door with an infant daughter, boards must disclose it to the membership in an open meeting and include their finding in the minutes. I envision defamation claims.

Meaningless Fines. If an owner turns his unit into a short-term rental in violation of the CC&Rs, he pays a small $100 fine and continues his rental business. The fine becomes the cost of doing business. The same thing with architectural violations. In wealthy associations, an owner could reach into his wallet and pull out a $100 bill to pay a meaningless fine and continue violating the rules.

Right to Cure. The amended statute gives members the right to cure the violation prior to the hearing. They always had that right. That is the whole point of a hearing--to induce compliance with the rules. If curing the violation would take longer than the time between the notice of the hearing and the hearing date, the board cannot impose discipline if the person provides a financial commitment to cure the violation--whatever that means.

IDR. If the person does not agree with the board's decision, he/she can request internal dispute resolution--another meaningless addition to the statute since members already have that right.

Notification. Another change is the notification requirement. Instead of fifteen (15) days, boards must give the person written notice of the board's decision within fourteen (14) days or the board's decision is void.

Once associations revise their disciplinary procedures, they must notify members individually. Posting them on the association's website is not sufficient. The new procedures must be mailed or emailed to members in accordance with the preferred delivery method specified by each member.

RECOMMENDATION: Boards need to revise their fine schedule to comply with the new requirements. Their enforcement procedures will need to adjust their fine schedule, include members' cure rights, add an IDR option, include written resolution procedures, and add the new time frame for notifying members of disciplinary actions. Boards can contact us for assistance.

ADAMS|STIRLING PLC

06/04/2025

Rampaging Peacock. Don't see this everyday. Something for the community newsletter. I have no clue where this bird came from, but it's up on the roof of a unit in one of our communities. Trying to get it caught so the Magnolia Bird Farm can come and pick it up where it will be in a safe place. Never a dull moment.