On August 3, 2026, Fannie Mae and Freddie Mac retired the shortcut most condo loans used to rely on. Before that date, a buyer financing an attached unit in an established condo project could usually close after only a light check of the building. Now, unless the project qualifies for an exemption or waiver, the lender has to underwrite the homeowners association itself, covering its budget, its reserves, its insurance, its legal disputes and its repair history.
For anyone buying or selling a Redwood City condo or townhome this fall, that changes what decides a closing date. The buyer's credit and down payment still matter. The building's documents now count just as much, and an unfinished balcony repair or a high master-policy deductible can stall a loan the buyer otherwise qualifies for.
The Shortcut That Closed on August 3
Fannie Mae's old Limited Review covered attached units in established condo projects outside Florida. It allowed loans up to 90% loan-to-value on a principal residence and 75% on a second home or investment property. Within those limits, the lender mostly had to confirm that the project met basic standards, was not on the ineligible list, and had no more than 15% of units 60 or more days behind on special assessments. A primary-residence buyer putting 10% down fit inside that lighter process.
Fannie Mae's Lender Letter LL-2026-03, issued March 18, 2026, ended it. Established projects that once qualified for Limited Review now need a Full Review, or a Waiver of Project Review where it applies, as it can for projects of ten or fewer units. For loan applications dated on or after August 3, 2026, compliance is mandatory. Freddie Mac retired its matching Streamlined Review on the same date in Bulletin 2026-C, sending established projects to its Established Condominium Projects review, with other paths such as exemption from review still available to eligible projects.
Estimates of how many loans this affects vary widely. The Community Associations Institute said in March that Limited Review historically accounted for about 40% of project reviews. CAI expected more formal questionnaires, more work for HOAs and managers, and possibly slower transactions. In a September 17 column in HousingWire, based on feedback from lenders in the Community Home Lenders of America, the estimate was higher:
"Based on feedback from CHLA members, an estimated 60% to 80% of current condominium originations utilized the limited review process when it was an option."
The same column said the industry was already seeing higher borrowing costs, fewer lenders making condo loans and longer closings. The two estimates measure different things and have not been reconciled. Either way, a large share of condo buyers who used to skip project underwriting now go through it.
| What the lender examines | Limited Review, before Aug. 3, 2026 | Full Review, now |
|---|---|---|
| Max LTV for a principal residence | 90% | Set by the loan program, not the review type |
| HOA budget and replacement reserves | Not required | At least 10% of budgeted assessment income or a qualifying reserve study, with the budget floor rising to 15% on Jan. 4, 2027 |
| Owners delinquent on regular dues | Not checked | No more than 15% of units 60+ days late |
| Single-entity ownership, commercial space | Not checked | Checked against concentration and square-footage limits |
| Litigation | Not checked | Screened for disputes affecting safety, structure or habitability |
| Critical repairs | Basic project standards | Project ineligible until repairs are done and documented |
How Redwood City's August Numbers Look With This Change in Place
The San Mateo County Association of REALTORS® publishes monthly MLS tables by city. For August 2026, the first month under the new rules, Redwood City condos and townhomes showed a $1,150,000 median sale price, 44 average days on market, 101% of list price received and 2.3 months of inventory. The same month's single-family table for Redwood City showed a $2.10 million median, 22 days on market, 107% of list and 1.0 month of inventory. Redwood Shores, which SAMCAR reports separately, had attached homes at a $1,410,000 median, 63 days on market and 97% of list in August 2026.
Houses sold in half the time and for a larger premium over asking. Part of that gap may come from the financing. A detached house on its own lot has no association budget or master policy for a lender to approve, while most condo sales with a conventional loan now depend on two approvals instead of one.
These samples are small. Redwood City recorded 10 condo and townhome sales in August 2026, and July's figures were 9 sales, a $1,100,000 median, 60 days on market and 100% of list. One month of data cannot show what caused the softer pace. It does show that condo buyers have more time and leverage than house buyers this fall, and a delay in project approval eats into that time for both sides.
The Balcony Report Is Now Part of the Loan File
California's SB 326 requires condo associations with three or more units to inspect wood-framed exterior elevated elements more than six feet above grade. These include balconies, walkways, decks, landings, railings and stairways. The first deadline for existing buildings was January 1, 2025. Inspections repeat every nine years after that, and newer buildings get their first inspection within six years of the certificate of occupancy.
Redwood City's SB 326 guidance puts the duty on the HOA, not individual owners. It requires a licensed architect or civil or structural engineer to perform the inspection. If the report finds an immediate threat to safety, the HOA must block access to the affected element until city staff approve the repair. Non-emergency corrective work needs a building permit application within 120 days, and the work must be completed within 120 days after the permit is issued. HOAs that cannot meet a deadline can ask Code Enforcement for a formal extension.
The inspection report and the loan file now overlap. Fannie Mae's guidance lists unsafe balconies among the critical repairs that make a project ineligible, and a lender that cannot document the project is free of critical repairs cannot sell the loan to Fannie Mae. The addendum to Fannie's condo questionnaire asks the association directly about inspection findings, unresolved safety or structural problems, deferred-maintenance plans, reserve balances, and current or planned special assessments. A special assessment also does not replace a budgeted reserve allocation under Full Review. An HOA that is still working through the 120-day permit and repair windows may therefore have a building that buyers can tour but conventional lenders cannot finance yet.
Two More Dates Tied to the Master Policy and Reserves
The project rules changed alongside new insurance terms. For loan applications dated on or after July 1, 2026, Fannie Mae caps the master property policy's per-unit deductible at $50,000. When a master policy carries a per-unit deductible, the buyer must also carry an individual unit-owner policy. In the same letter, Fannie acknowledged that rising premiums and limited insurance availability are creating problems for borrowers and HOAs.
Next, for Full Review applications dated on or after January 4, 2027, the minimum reserve contribution rises from 10% to 15% of annual budgeted assessment income. That rule is not in effect yet, and a qualifying reserve study can still serve as an alternative to the budget percentage, provided the budget includes the study's highest recommended reserve amount. A Redwood City HOA adopting its 2027 budget this fall is setting the number lenders will test against the 15% minimum starting in January. A seller planning to list early next year has reason to look at that budget before it is final.
What a Seller Can Gather Before Listing
C.A.R.'s September 26, 2026 guidance for agents comes down to starting early: begin the condo review early, request HOA documents early, and bring the lender in before project eligibility threatens the deal. In Redwood City, that means a seller can hand over a document set that answers the Full Review questions before a buyer's lender asks:
- The current-year HOA budget, showing the reserve line as a share of assessment income.
- The most recent reserve study, since Fannie no longer accepts the baseline funding method for applications dated on or after August 3, 2026.
- The SB 326 inspection report and, if corrective work was required, proof of the permit and of completion.
- The master insurance declarations page, with the per-unit deductible clearly visible.
- Delinquency figures, ownership mix, litigation status and commercial square footage, which are the items Fannie's Form 1076 questionnaire asks the HOA to report.
Gathering these items early turns a lender's project questions into a document handoff instead of a weeks-long wait on a property manager. It also shows the seller at the start whether the building has a problem that would push buyers toward cash or more expensive non-QM financing, which are the routes left when a project cannot get conventional approval.
Questions Redwood City Condo Owners Are Asking
Was the August 3 change delayed? No. In July, the Community Home Lenders of America, CAI and the National Association of Mortgage Brokers asked for a one-year delay. They warned that full reviews could add more than $1,000 in borrower costs. Fannie Mae and Freddie Mac implemented the change on schedule.
Does a larger down payment avoid the Full Review? No. The down payment still affects the buyer's loan terms, but it no longer opens a lighter project review for an established building.
Are smaller buildings treated differently? Yes. Projects of ten or fewer units may qualify for a Waiver of Project Review. Projects of five to ten units generally must not be part of a master association or larger development, and the project still has to meet insurance requirements and cannot carry an "Unavailable" status in Fannie Mae's system.
How common is an "Unavailable" project in this region? As of March 2025, Bay Area News Group reported 168 complexes in the five-county Bay Area on Fannie Mae's unavailable list. The names were not published.
If you own a condo or townhome in Redwood City and plan to sell in the coming months, Lana Morin Pierce can help you gather your association's budget, reserve study, SB 326 report and insurance documents before you list, so a buyer's lender can review the building without delaying escrow. Book a Consultation to go through your HOA's documents together.
