Maintaining mortgage eligibility is one of the most important aspects of protecting property values. If your condominium association wants to keep units eligible for Fannie Mae financing, which many other lenders use as a benchmark, the association must comply with Fannie Mae’s lending regulations to avoid the dreaded “Fannie Mae Blacklist.” On March 18, 2026, Fannie Mae updated its lending guidelines in efforts to make compliance easier for condominiums.
While the new guidelines increased the minimum reserve funding requirement to 15% of annual assessment income (previously 10%), Fannie Mae throttled back on its stringent insurance requirements after learning most associations were on the “blacklist” because they could not obtain insurance policies that complied with the Fannie Mae guidelines. Specifically, the new guidelines allow for a higher deductible on the association’s policy, and eliminate the need for an “inflation guard” endorsement. Fannie Mae will not approve loans for units unless your association’s casualty insurance meets specific standards, which are identified below.
First, your policy must provide for full replacement cost coverage for all assets, except roofs. Roofs must be covered, but, are not required to be covered on a replacement cost basis, and can utilize an “actual cash value basis.” Full replacement cost coverage means the insurance will pay the full cost to rebuild if a building suffers damage or destruction. Policies that settle claims on an “actual cash value” basis deduct depreciation from the insurance proceeds.
Next, the policy form must be a “special” coverage form or its equivalent. At a minimum, the policy should cover all perils included in a commercial “broad” coverage form—such as fire, windstorm, hail, and vandalism. Most modern policies meet this requirement, but you should verify this with your insurance agent. Also, Fannie Mae limits any deductible to no more than $50,000.00 per unit.
Beyond these basics, Fannie Mae expects associations to include certain special coverages when available in the market, which almost always requires special endorsements added to the standard policy. These include the Building Ordinance or Law coverages that are available in the respective market, which addresses the extra expenses of complying with updated building codes after a loss. This coverage typically includes three parts: loss to the undamaged portion of a building, demolition costs, and increased cost of construction.
Finally, make sure your policy includes a Condominium Association coverage-type Form. This endorsement provides recognition of an insurance trustee, a waiver of rights of recovery, and provisions for unit-owner’s insurance. These details ensure the policy properly addresses the unique structure of condominium ownership.
Review your insurance policy every year and work closely with experienced insurance professionals to confirm compliance. If your association is on Fannie Mae’s “Do Not Lend List,” Kaman & Cusimano can assist in filing an appeal to remove your association from the list. Kaman & Cusimano clients can contact our office to discuss. If your association is not currently a Kaman and Cusimano client and is interested in learning more about our services and how we can help, please click the following link: Request for Proposal and type “Fannie Mae Do Not Lend List” in the subject field.
