Starting with loan applications dated on or after January 4, 2027, condo projects that go through Fannie Mae's Full Review face a higher bar. Under the standard budget test, the association must budget at least 15 percent of its annual assessment income for replacement reserves. Today the minimum is 10 percent. In Bulletin 2026-C, Freddie Mac set the same 15 percent minimum on the same date. For a buyer touring condos along the Camelback Corridor, the association's budget now carries as much weight as the floor plan or the view. Two units in neighboring towers can have similar finishes and similar asking prices and still be financed very differently. That depends on how each association funds its reserves and how its master policy is written.
The price data already shows a split. Single-family values across the Phoenix region held steady over the past year, while condos and townhomes slipped. In 85016, many buyers expect conventional financing on a condo, so the building's books are now part of the asking price.
The 2026 rule changes, step by step
Fannie Mae published the changes in Lender Letter LL-2026-03 on March 18, 2026, and Freddie Mac issued matching changes that same day. They took effect in three steps:
- July 1, 2026. For loans with application dates on or after July 1, Fannie Mae capped the per-unit deductible on a condo master policy at $50,000. A separate change, effective as soon as the letter was published, dropped the requirement that master policies insure roofs at replacement cost. Roofs still have to be insured.
- August 3, 2026. Fannie Mae retired its Limited Review process. Established condo projects now need a Full Review or, where eligible, a Waiver of Project Review. Freddie Mac retired its own shortcut, called Streamlined Review, on the same date. Reserve studies also got stricter on August 3. If an association relies on a study instead of the standard budget test, its budget must fund the study's highest recommended reserve amount. Studies that use the baseline funding method, which lets the reserve balance approach zero without going below it, no longer count.
- January 4, 2027. The reserve minimum rises from 10 to 15 percent of annual budgeted assessment income for Full Reviews.
Limited Review was the lighter process available to established projects. Those projects now go through a Full Review, which includes the reserve test that tightens in January, unless they qualify for a Waiver of Project Review. The expanded waiver covers projects of 10 or fewer units, and many Biltmore condo buildings are much larger than that.
What the regional numbers show
Here is how the two property types compared in the ShowingTime Phoenix-region dashboard for September 2026, current as of October 3, 2026.
| Phoenix region, September 2026 | Townhouse/Condo | Single-Family |
|---|---|---|
| Median sale price, rolling 12 months | $334,625, down 4.4% year over year | $481,990, up 0.4% |
| Days on market, rolling 12 months | 91, up 15.2% | 78, up 6.8% |
| Active inventory, September | 4,309, up 7.6% | 21,552, up 6.7% |
| Months of supply | 5.9 | 4.3 |
The dashboard counts condos and townhomes together, and it covers the whole region rather than 85016 alone. The direction is still clear. Condos take longer to sell, and supply is growing faster than buyers are absorbing it. For the overall metro, the ARMLS September STAT report, which uses August 2026 data, put the median sale price at $445,000 and median days on market at 64.
Cromford Report senior housing analyst Tina Tamboer told the Tempe Tribune that the Valley's median condo price had fallen to about $305,000, near mid-2021 levels. "The condo market is just really frigid right now," she said. Her figure is lower than the dashboard's because it measures condos alone over a different window. Both sources point the same way.
Price competition from detached homes explains part of the decline. Tamboer named two other causes in the same article. "Aging stock is my number one," she said, describing older complexes that need roofs and stucco after years of delayed maintenance. She also pointed to lenders checking both the building's condition and the association's finances before they approve a loan. The 2026 rule changes are a written version of that second cause.
How the reserve rule plays out in a building
Take an illustrative association that bills $1,000,000 a year in assessments. Under the standard percentage test, it needs $100,000 budgeted for replacement reserves today. For a Full Review on an application dated January 4, 2027 or later, the same test calls for $150,000. Getting there means higher dues or cuts elsewhere in the budget. An association that relies on the reserve-study alternative is judged differently. Its budget has to fund the study's highest recommended allocation, and baseline-funding studies no longer qualify.
The tests are tied to each other. Fannie Mae's Full Review also fails a project if more than 15 percent of its units are at least 60 days late on regular dues, and it applies the same 15 percent limit to each special assessment. Projects that need critical repairs are ineligible. So are projects facing pending litigation over safety, structural soundness or habitability, with limited exceptions for minor cases. Freddie Mac looks at the purpose, approval date, amounts and payoff schedule of any current or planned special assessment. It also requires a review of a structural and mechanical inspection completed within the past three years.
Tamboer described how one problem can lead to the next. When reserves fall short, roof and stucco repairs become special assessments. Owners who can't pay may sell, which adds listings. Meanwhile, a building that fails the lender's tests loses some of its potential buyers. A buyer can be fully qualified and still be turned down because of the building. Her practical suggestion was to ask a lender whether a loan has closed in the complex recently, "in the last, say, month or two," as a sign of whether it is currently warrantable.
FHA financing works differently. HUD insures condo loans in FHA-approved projects. In some cases it also offers Single-Unit Approval in buildings that aren't approved, and HUD's lookup tool lets anyone search approved projects by name or location.
The insurance change that reaches into the unit
The July deductible cap affects buyers' own policies as well. If a master policy has a per-unit deductible, Fannie Mae requires the owner to carry a unit-owner policy. Its coverage has to be at least the deductible or the cost to restore interior improvements the master policy doesn't cover, whichever is greater. In buildings with large deductibles, that adds to the monthly cost of owning, alongside dues.
Arizona's resale package answers most of the lender's questions
Arizona requires condo sellers to hand over many of the same facts lenders now check. Under A.R.S. § 33-1260, the timing depends on building size. In a condominium with fewer than 50 units, the seller provides the disclosure within 10 days after the offer is accepted. In a project of 50 or more units, the association delivers it within 10 days after receiving notice.
| What the Arizona package must include | What the lender's review asks |
|---|---|
| Current assessments and approved or proposed special assessments | Delinquency and special assessment tests |
| Operating budget and financial statements | Whether reserves meet 10% now, 15% from January 4, 2027 |
| Most recent reserve study, if any | Whether the study's highest recommended amount is funded |
| Known common-element deficiencies likely to bring repair costs within six months | Critical repair exclusion |
| Summary of pending lawsuits and amounts claimed, other than collection suits against owners other than the seller | Litigation exclusion |
| Current insurance certificates and coverage details | Deductible cap and unit-owner coverage |
The statute caps the combined resale, lien-estoppel and transfer fees at $400, with a rush fee of up to $100 and a document-update fee of up to $50. These fees can be collected only once per transaction, no earlier than close of escrow. A buyer who compares the package against the lender standards as soon as it arrives has the most time to raise questions with the lender.
Where this shows up in Biltmore's buildings
The Biltmore condo market includes buildings of very different ages. Optima Biltmore Towers is a 230-residence, two-tower condominium completed in 2006, according to the developer's project page. Tamboer noted that newer developments and properties close to jobs and freeways generally hold up better.
Some associations publish the details a lender reviews. The Biltmore Terrace association's year-end update on its 2024 work reported roof coating and tile and underlayment replacement. It also reported $199,080 contributed to reserves and no increase in monthly assessments for 2025. Updates like that give a buyer an early view of how a building handles capital work.
New supply is still in the pipeline. In February 2026, Phoenix City Council unanimously approved JDM Partners' luxury condominium project at 2400 E. Arizona Biltmore Circle, near the Arizona Biltmore and Wrigley Mansion, KTAR reported. The developer reduced the unit count after hearing from neighbors. The original May 2025 proposal, as azcentral reported, called for up to 203 condos averaging more than 2,000 square feet. Fannie Mae's 50 percent presale requirement for new projects remains in place.
Quick answers
Does the 15 percent rule apply to loans already in process? Fannie Mae applies it to Full Reviews on loan applications dated on or after January 4, 2027.
Can a sale still close if the building doesn't meet these tests? These standards govern loans meant for sale to Fannie Mae and Freddie Mac. HUD runs its own approval process for FHA loans. A lender can explain which programs fit a particular building.
What should a seller have ready? Have the budget, reserve study, insurance certificates and any special assessment details ready before listing. Buyers in 85016 will be checking them against the lender standards. The sellers guide covers listing preparation, and the mortgage calculator can show how dues and insurance change a monthly payment.
This post is general information, not legal, lending or insurance advice. Please confirm how these rules apply to your loan and building with your lender, attorney or insurance professional.
If you are weighing a condo in Biltmore and want to see how a particular building's budget, reserves and master policy compare with the 2027 standards before you write an offer, Arizona Proper Real Estate will go through the documents with you and bring your lender in early. Schedule a private consultation.
