When a mortgage lender writes directly to the Federal Housing Finance Agency to flag a regulatory problem, the financing landscape for an entire property category is signaling real stress. That is exactly what happened when AD Mortgage submitted a formal letter to the FHFA raising concerns about condo reserve funding requirements — rules that have become one of the most consequential, and least understood, factors in Florida condominium transactions today.
For buyers and sellers across Florida’s condo market, from Miami-Dade to Pinellas County, this development deserves close attention. The rules in question don’t just affect whether a building passes inspection. They determine whether a buyer can obtain conventional financing at all.
What AD Mortgage Raised With the FHFA
AD Mortgage’s letter to the FHFA centers on the agency’s guidelines — enforced through Fannie Mae and Freddie Mac — that govern condo project eligibility for conventional loan backing. Specifically, the concern involves reserve funding thresholds: requirements that condominium associations maintain a funded reserve account equal to at least 10% of their annual budget.
That 10% floor, introduced in updated Fannie Mae and Freddie Mac guidelines that rolled out following the 2021 Surfside collapse, has created a hard screening point in the lending process. If an association falls below that threshold — and a significant number of Florida associations do — the building can be flagged as ineligible. The result: buyers in that building can’t close using a conventional loan backed by Fannie or Freddie, which covers the vast majority of residential mortgage originations in the country.
AD Mortgage’s letter reportedly flags the practical difficulty lenders face in enforcing these rules consistently, particularly around data availability and HOA disclosure timelines. Associations aren’t always forthcoming with reserve study documents, and the underwriting windows involved in condo purchases don’t always leave room to resolve the ambiguity before a contract expires.
Why Florida Is Ground Zero for This Issue
Florida is uniquely exposed to reserve requirement pressures for several overlapping reasons.
The state’s condo stock is older on average than most of the country. A large share of Florida’s condominium buildings were constructed during the 1970s and 1980s boom, and many of those associations historically underfunded reserves — a legal practice under prior state law. The Surfside tragedy changed everything. Florida’s legislature responded with SB 4-D and subsequent condo safety legislation that mandated milestone inspections and structural integrity reserve studies for buildings three stories or higher. As those studies are completed, many associations are discovering — and disclosing — reserve deficits that now trigger lender red flags.
At the same time, bipartisan efforts at the congressional level to ease the financial burden on condo owners have moved slowly. Legislation aimed at creating federal loan programs to help associations fund required repairs has attracted support, but has not yet been enacted in a form that meaningfully offsets the pressure buyers are facing in the market today.
The numbers illustrate the scope of the problem:
- As of recent market data, an estimated 1 million-plus condo units in Florida are subject to the new state structural reserve requirements
- Special assessments issued to owners in some South Florida buildings have ranged from $10,000 to well over $100,000 per unit
- Buildings flagged as ineligible by Fannie Mae or Freddie Mac have, in some cases, seen list prices drop 15–25% as sellers adjust to a cash-only buyer pool
What This Means for Buyers and Sellers Right Now
For buyers, the financing risk inside a condo transaction has increased substantially. A building that looks clean on the surface — solid rental history, well-maintained common areas, reasonable HOA fees — can still fail lender review if the reserve account is underfunded. Buyers should request the most recent reserve study and association financials before going under contract, not after.
There are several specific items worth reviewing before making an offer on any Florida condo:
- Reserve funding percentage — Is the association at or above the 10% of annual budget threshold?
- Pending or recent special assessments — Has the board already levied a special assessment, and is another anticipated?
- Structural integrity reserve study status — Has the required study been completed, and what did it identify?
- Litigation status — Active litigation involving the association can independently disqualify a building for conventional financing
- Insurance coverage adequacy — Particularly relevant in coastal markets, where HOA master policy coverage gaps create additional lender scrutiny
For sellers, a building with reserve deficiencies doesn’t necessarily mean a dead deal — but it does mean a dramatically smaller buyer pool. Pricing to attract cash buyers or investors, or working with the association to accelerate reserve contributions before listing, are worth evaluating with your agent before the property hits the market.
The Broader Lending Signal
AD Mortgage’s decision to take concerns directly to the FHFA is not routine. Lenders typically absorb regulatory friction through internal process adjustments. When a lender escalates to the agency level in writing, it suggests the practical implementation problems are significant enough that they cannot be solved property-by-property.
The FHFA has not yet issued a public response to the letter, but the industry is watching. Any revision to the reserve funding threshold, or any guidance that creates clearer safe harbors for lenders evaluating borderline associations, could meaningfully affect how many Florida condo buildings qualify for conventional loan backing. That outcome would directly impact transaction volume and pricing in markets like Miami Beach, Fort Lauderdale, and Clearwater, where attached housing makes up a disproportionate share of the for-sale inventory.
Given that condo safety legislation continues to evolve at the state level, and the financial burden on existing owners remains substantial, this regulatory feedback loop between lenders, federal agencies, and Florida lawmakers is likely to remain active through 2025 and into 2026.
What to Do Before Your Next Condo Transaction
If you are buying or selling a Florida condominium, the reserve question should be addressed at the very start of the process — before an offer is accepted, not during the financing contingency period. Ask your lender to run a preliminary condo project review using current Fannie Mae or Freddie Mac eligibility criteria. Ask the listing agent or HOA for a copy of the most recent reserve study and the association’s current balance sheet.
Buildings that meet the reserve funding threshold, have completed their structural integrity studies, and carry adequate insurance coverage will command a real financing premium in this environment. That premium is measurable — and it’s only likely to grow as lender scrutiny intensifies.