May 12, 2026 | Mark Luis Foster

From time to time, we publish great informational articles from our sponsors. This article comes from Antony Startup of Twin Cities Criterium Engineers, a sponsor of our Eagan Chapter of our network.

Antony writes about the new Fannie and Freddie rules, a tricky set of regulations that require careful planning.  if you want to learn more about Twin Cities Criterium, visit their website HERE.  They do outstanding work on reserve studies.

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Why Minnesota Boards Need to Pay Attention to the New Fannie and Freddie Reserve Rules

Imagine listing a home in your association and hearing, “The buyer’s loan fell through because the HOA’s reserves are too low.” That is the kind of surprise these new Fannie Mae and Freddie Mac rules are designed to prevent, and it is exactly why boards need to pay attention now.

The new lending rules mean lenders will look more closely at your reserve line item and your reserve study. If reserve funding is too low, or if the study is outdated or unclear, buyers may have trouble getting conventional mortgages. That can shrink the buyer pool and put pressure on resale values, even in communities that are otherwise well maintained.

In Minnesota, many HOAs are governed by the Minnesota Common Interest Ownership Act (MCIOA), which expects boards to maintain the property and use reasonable business judgment. These lending changes raise the practical standard by placing more weight on current reserve studies, documented funding plans, and clear responsibility for common building components.

Key Dates and Deadlines

• August 3, 2026: If a lender relies on a reserve study instead of the percentage test, the association budget must use the highest recommended reserve contribution in that study.
• January 4, 2027: The default minimum annual reserve contribution increases from 10% to 15% unless the association has an up-to-date reserve study and follows its highest recommended funding level.

Four Questions Every Board Should Ask

1. How old is the reserve study?
   • Less than three years old: confirm it clearly states a recommended annual contribution and that the board is actually budgeting that amount.
   • More than three years old: plan for an update.
   • More than five years old: consider a fresh, full study rather than a limited update.

1. Are association assets being maintained?
   • Complete the repair and replacement work identified in the reserve study.
   • Keep good records of projects completed, including contracts, invoices, and dates.

3. What percentage of the annual budget goes to reserves?
   • At or above 15%: the association may be in a stronger position, assuming the reserve study supports that funding level.
   • Below 15%: verify that the current reserve study clearly supports the lower amount. If it does not, start planning gradual increases now.

3. Who is responsible for major building components?

For your HOA, ask one simple question: when major exterior items wear out, does the association pay, or do individual owners pay?

• If your association, not individual owners, pays for roofs, siding, and other major exterior elements and insures the buildings, these new reserve rules apply directly to you.
• If each owner maintains and insures their own home and the association mainly handles shared items like landscaping, roads, monuments, or a pool, the community is more like a traditional single-family HOA, and these rules may apply less directly.

Simple Action Plan for the Next 12 Months

• Schedule a reserve study update. Put it on your board calendar now. Ensure the final study provides a clear recommended annual contribution that aligns with the new lending expectations.
• Phase in higher contributions, if needed. Rather than one huge jump, consider mapping out a two- to three-year path to reach the recommended funding level or the 15% benchmark. Communicate that plan to owners so they understand the why, not just the number.
• Maintain and document the work. Lenders and buyers want to see follow-through, not just a report on a shelf.
• Align advisors. Make sure the reserve study, budget, disclosures, and financial reporting are consistent.

Quick Sidebar: Who Should Pay Closest Attention?

• High priority: condominium associations and many townhome communities where the association maintains major building components and carries master insurance on the structures.
• Lower priority, but still worth watching: single-family HOAs where owners maintain and insure their own homes and the association mainly manages shared amenities.

This is not just a budgeting issue. It is a planning, maintenance, insurance, and marketability issue, and boards that respond early will be in a better position when buyers, lenders, and owners start asking harder questions.