A deal is moving, the buyer's financing looks solid, and then the loan officer calls: the building came back "non-warrantable." Nothing about the unit changed. What failed is the project review — the lender's check of the condominium itself — and in 2026 the most common reason to fail it is the reserve budget.
What the label means
"Warrantable" is lender shorthand for a condo project that meets the eligibility rules for conventional mortgages — the rules Fannie Mae publishes for the loans it buys. When a project meets them, lenders can sell the loan on; when it doesn't, most conventional financing disappears and the pool of buyers shrinks to cash and specialty loans. No agency stamps a building either way in advance: only a lender's project review decides, one application at a time.
What changed in 2026
Fannie Mae's Lender Letter LL-2026-03 rewrote the reserve part of that review, on two dates:
For applications dated on or after August 3, 2026, the association's budget must include the reserve study's highest recommended contribution — "baseline" funding, where reserves are allowed to fall toward zero, is no longer accepted for project eligibility. For applications on or after January 4, 2027, reserves must also be at least 15% of annual budgeted assessment income (up from 10%) unless a qualifying reserve study is used.
Both tests read straight off two documents every association already has: the reserve study and the adopted budget. Test 1 compares the budget's annual reserve contribution to the study's highest recommended contribution. Test 2 divides the reserve contribution by total budgeted assessment income and looks for 15%.
Legal but unsellable
Here is the trap: most state laws allow a board to fund less than the mortgage tests require. Florida, for example, permits a baseline funding plan — reserves may be projected down toward zero as long as the balance never goes below it. A board can adopt that budget in full good faith, satisfy its state statute, and still leave every owner unable to sell to a buyer with a conventional loan. The board did nothing wrong; the two rulebooks simply ask different questions.
Check the numbers before the next deal does
Five numbers answer both tests: total budgeted assessment income, the current reserve contribution, the study's highest recommended contribution, reserve cash on hand, and the property state. A realtor can get them from the association's manager in one email; a board member has them in the budget packet. Enter them below — the check runs in your browser and stores nothing.