A condo sale at a large Annapolis project of more than 175 units almost fell apart over comments in the meeting minutes. John Downs, a mortgage advisor who works across D.C., Maryland and Virginia, described the file this summer in an account on Downs Mortgage Group. The management company would not answer the lender's structural-integrity question, so the original lender read the minutes instead. There it found reports of more than 50 leaks in a year, along with bids to replace every water pipe in the building at roughly $15,000 per unit.
By Downs's account, the pipes were fine. The building had occasional leaks and fixed them. The loan closed only after someone went back through the reserve study, the repair history and the financials to piece together what was actually happening. That review now applies to most condo purchases. Since August 3, 2026, the documents lenders read most closely are judged against a federal standard that differs from the one Maryland condo boards are held to.
The review every larger building now gets
Lenders used to have a shortcut for established condo projects called Limited Review. In a March 18, 2026 lender letter, Fannie Mae retired it. Every loan application dated on or after August 3, 2026 has to go through a Full Review, or a waiver where one applies. Freddie Mac adopted matching changes in Bulletin 2026-C.
The same letter widened the waiver for small buildings. Projects with ten or fewer units can now skip project review entirely. Projects with five to ten units qualify only if they are not part of a master association or a larger development. A small Annapolis condo building and a large one now go through very different financing processes, even when their monthly fees are the same.
For a building that gets a Full Review, the questions center on reserves. Fannie Mae explained why in the letter. Since adding critical-repair requirements in 2023, it has seen a link between condo projects with underfunded reserves and projects that need critical repairs. It also noted that owners in those buildings can face "unexpected special assessments or higher regular assessments or dues."
Two rulebooks for the same reserve account
Maryland already regulates condo reserves. The 2025 law, Chapter 519 (HB 292), requires a condo board to work with a qualified reserve professional on a funding plan. The board chooses one of several methods, and baseline funding is on the list. Fannie Mae describes baseline funding as the method that "allows the reserve cash balance to approach but never fall below zero."
Fannie Mae and Freddie Mac now treat that method differently. When a building's budget falls short of the agencies' reserve percentage, a lender can still use a reserve study to show the reserves are sufficient. Lenders can no longer accept baseline funding to make that case, and the budget has to include the study's highest recommended reserve allocation. Freddie Mac's current Guide also says a study built on baseline funding can't be used to waive the percentage requirement.
| Question | What Maryland's 2025 law allows | What Fannie Mae and Freddie Mac accept |
|---|---|---|
| Funding method | Component, cash flow, baseline, threshold cash flow, or another GAAP-consistent method | Baseline funding not accepted when a reserve study is used to show reserves are sufficient |
| How much to set aside | The amount in the most recent reserve study and funding plan | The study's highest recommended allocation, or the minimum budget percentage |
| Minimum reserve share of budget | No single statewide percentage | 10% now; 15% for Full Reviews on applications dated on or after Jan. 4, 2027 |
| Catching up after a first study | Five fiscal years to reach recommended funding | No matching grace period in the agency text |
| Hard years | Two-thirds board vote can declare hardship for one year, renewable once | No matching exception in the agency text |
A regional community-association services firm summed up the gap this summer: "A Maryland Board can be compliant with state law and still be steering its community toward non-warrantable status." In CAI's July 2026 Quorum, attorney Tiago D. Bezerra pointed out that the agency standards are not requirements under association law. He added that missing them can still limit buyers' access to loans and make units harder to sell. Whiteford attorneys Claudia Lopez-Knapp and Carly Ritter made a similar point in the same issue. They advised associations not to use baseline funding when relying on a reserve study.
Why the timing matters for Anne Arundel buildings
The state and federal schedules overlap for older condos outside Prince George's and Montgomery counties, Anne Arundel included. Here is how the dates line up for a condo that had no reserve study on or after October 1, 2018:
- October 1, 2023. The initial reserve study was due. Updates follow at least every five years, so a building that met the deadline in 2023 is looking at its next study around 2028.
- October 1, 2025. Chapter 519 took effect. The time to reach the funding level recommended in an initial study went from three fiscal years to five.
- August 3, 2026. Limited Review ended, and the agencies stopped accepting baseline funding in reserve-study reviews.
- January 4, 2027. The minimum reserve allocation rises from 10% to 15% of budgeted assessment income for Full Reviews. That is less than three months away.
Take a building that finished its first study in fiscal 2023. Under the old three-year rule, it would have needed to reach full recommended funding around now. Chapter 519 gives it until the end of fiscal 2028 under state law. Meanwhile, the lenders writing mortgages on its units started applying stricter federal standards this August. The extra time is real under state law, but lenders don't count it.
Maryland also gives boards a hardship valve. A two-thirds board vote can allow a reasonable deviation from reserve funding for one fiscal year, renewable once. Owners must get advance notice, the vote has to happen at a regular or special meeting, and funding for health, safety and structural items has to continue. A hardship vote leaves a record in the minutes, and the minutes are the same documents lenders read.
Where the inventory numbers fit
None of this shows up in a monthly fee, but it may show up in how quickly condos sell. Anne Arundel County is part of the Baltimore Metro region in Bright MLS's reports. In August 2026, the region had 876 active condo listings, up 22.9% from a year earlier, and 3.32 months of supply, up from 2.65. The median condo sold price was $299,900, flat from the year before. Detached homes in the same region had 2.18 months of supply that month. Across all home types, Anne Arundel County had 1,320 active listings in August 2026, up 18.4%, and 2.14 months of supply. Bright released those figures on September 10, 2026.
Those condo figures cover the whole region, and Bright has not published a county-level condo breakdown. Buildings piling up inventory doesn't prove financing rules are the cause. A flat median price with a growing number of listings does mean condo buyers have more choices than detached-home buyers, and more time to look at each building's reserve paperwork.
What the resale package shows, and what it leaves out
Maryland's condo resale law, Real Property §11-135, generally requires the seller to deliver a disclosure package at least 15 days before closing. Among other items, it includes:
- The declaration, bylaws and rules
- Current assessments and any unpaid fees
- Capital expenditures the association has approved
- Financial statements
- The current budget, including the current reserve study report or a summary of it
- The status and amount of the reserve fund, or a statement that there is none
The buyer can rescind in writing within seven days of receiving all the required disclosures. Condos with fewer than seven units have a shorter required list, and the reserve study is not on it. Homeowners association resales follow a different statute, §11B-106. It covers fees, delinquencies, certain litigation and the governing documents, but doesn't expressly require the reserve study.
That puts a condo buyer's seven-day window and the lender's Full Review in the same stack of paper. The funding method named in the plan, the share of the budget going to reserves, and any hardship vote in the minutes all appear there. The Annapolis file Downs described shows how much a single line in those documents can matter.
A few questions we hear often
Does a rising condo fee mean the building is in trouble? Not necessarily. Maryland law lets boards raise assessments to fund required reserves, even when governing documents set a cap. A building that steps up its reserve contributions may be closing the gap between state compliance and lender standards.
Can a board borrow from reserves? Under Chapter 519, yes, as long as the money goes back into the reserve account within five years. The board also has to review progress on its funding plan at each annual meeting.
Has anything changed since August? Fannie Mae's most recent Selling Guide update, dated October 7, 2026, deals with employment verification, income documentation and other topics, not condo reserves. Freddie Mac's Bulletin 2026-C still lists January 4, 2027 as the date the 15% minimum takes effect.
If you're weighing an Annapolis condo, the reserve study, funding plan and recent minutes say more about the purchase than the monthly fee does. Jeannine Wayson can walk you through a building's resale package before your seven-day window opens, so the reserve picture is clear early. Let's Connect. Schedule a Free Consultation.
This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.
