Financing & underwriting
The association's insurance deductible is about to get a hard ceiling.
Fannie Mae's Lender Letter LL-2026-03, issued alongside matching Freddie Mac guidance, caps the per-unit deductible on a condo association's master property insurance policy at $50,000. It applies to loan applications dated July 1, 2026 and later. A master policy over that cap is one more way a building can be flagged non-warrantable — on top of the reserve and litigation checks already in place.
What the rule actually changes
Today, lenders mainly check that a master policy's deductible doesn't exceed 5% of the coverage amount. The new rule adds a flat $50,000 per-unit ceiling on top of that percentage test, for loan applications from July 1, 2026 onward. A large, older building with a high-value master policy and a deductible sized as a percentage can clear the 5% test and still miss the new flat cap.
The new trigger for your own HO-6 policy
The same update widens when a buyer needs an individual unit owner's (HO-6) policy: whenever any part of the unit's interior isn't covered by the master policy, or whenever the master policy carries a per-unit deductible at all. If your building's master policy has a per-unit deductible — common on buildings that have already had a claim — expect your lender to require your own HO-6 policy as a condition of closing, sized to cover at least the master policy's deductible.
What to check before you close
- What is the master policy's per-unit deductible, in dollars — not just the percentage figure usually quoted?
- Does the master policy already carry a per-unit deductible, which would trigger the HO-6 requirement regardless of the dollar amount?
- Is your loan application dated before or after July 1, 2026 — the rule only binds going forward, so a building fine today can still be a problem if your closing slips past the date?
The insurance declarations page and master policy are usually in the same document packet as the SIRS, reserve study, and financials. Send us what you have — we'll check free whether there's enough there to work out your unit's likely exposure, insurance included.
Curious what else trips a lender's full review? Non-warrantable condo, explained → The reserve-percentage bar is moving too — the 2027 15% rule →