Jovanka Novakovic, a luxury real estate agent with Compass in Chicago, thinks stricter financing standards for conventional loans are good for buyers.
The rules force a closer look at whether a building's condo association is fiscally sound, she told The Real Deal.
But as a condo board president, she has to explain the logic to her neighbors, who are bracing for a 5 to 10 percent increase in their building's annual dues to meet the revised Fannie Mae and Freddie Mac condo lending rules .
While the higher dues could amount to more monthly real estate costs for homeowners, not meeting them could leave units basically unmarketable to any buyers needing a conventional loan in the near future.
That's because Fannie Mae in August retired its limited review process and Freddie Mac ended its streamlined review for condo loans. Both had fast-tracked conventional mortgages without a deep dive into a condo association's finances.
Starting Jan. 4, though, Fannie is also expected to raise the minimum reserve contribution it expects from associations from 10 percent to 15 percent. Missing the requirements could render a building unwarrantable, meaning the agencies won't back a mortgage or buy it in the secondary market.
This has forced condo associations like Novakovic's to act now and beef up reserves in their annual budget calculations to remain in good standing, while brokers and borrowers alike figure out how to weather the financial implications in a city where housing availability and attainability is already strained. Experts predict this could ultimately force borrowers to explore financing options that haven'tbeen the mainstay in a city like Chicago.
The changes have started having an impact on purchase decisions and on mortgage underwriting, according to Kyle Gillespie, a senior vice president at mortgage lender OriginPoint.
He estimates that about 65 to 70 percent of the condo loans his firm handles qualified for limited review before Aug. 3, but since the change, one in five of those loans must go through a full review of the association's finances while the rest can still be done with limited review through other investors.
Currently, traditional loans are the most popular mode of condo financing in the state.
Buyers used conventional loans for 65.7 percent, or 16,653, of the 25,344 condo purchases that closed in Illinois in the last 12 months until Oct. 2026, according to Illinois-based Midwest Real Estate Data findings obtained by TRD . Buyers paid cash in 31.3 percent, or in 7,935 of those deals.
An additional layer of complication
It wasn't long ago that condo associations faced similar heightened scrutiny.
After the 2021 Surfside condo collapse in Florida , Fannie Mae adopted a supplemental questionnaire to assess structural integrity, financial stability and safety.
"Post-Surfside, I'd say they were already asking a lot of questions, and certainly boards and property managers were prepared for that," said Matt Moodhe, a condominium attorney at KSN Law. "The questions are still the same, but the extent of the review has become more thorough now."
The most immediate impact of the changes is a longer lending process.
In mid-to-late August, underwriters began requesting additional questionnaires from property managers and condo boards, seeking details on structural repairs, deferred maintenance and building code violations, which delayed closings, according to Moodhe.
The changes also add costs to homeownership. For individual owners, it leads to a hike in HOA fees, special assessments and insurance premiums. For new buyers, it results in a higher estimate for condo questionnaire costs charged to prospective buyers, according to Mike Ferrall, the new president of the National Association of Mortgage Brokers.
Ferrall's group estimates about 40 percent of condo purchases nationally went through limited review before the announcement.
"A limited review costs a couple hundred dollars and is a fast process, whereas a full review costs almost double and could take five to seven days while [the buyer] is rate locked," he said.
The national association pushed back against the changes in a March white paper, arguing they will hurt first-time homebuyers, for whom condos are often the most affordable entry point. In June, it asked the Federal Housing Finance Agency to delay the implementation.
"The changes will also have a compounding effect," Kimber White, the association's outgoing president, said. He expects them to drive up special assessments and make it harder for owners to refinance or cash out of their condos.
White said newly built condo buildings tend to have the resources, but conversion projects, where many first-time buyers land, do not.
His concern comes as Chicago sees a slight uptick in smaller, newer apartment buildings being transitioned to condos in Lakeview, Lincoln Park and Uptown amid historic inventory lows.
A notable outcome of tightening standards is that buyers may be pushed to consider non-QM (non-qualified or non-traditional) lenders, which typically offer higher interest rates.
Portfolio loans and cash purchases are also likely to benefit, according to Michael Rosenblum , a luxury agent with Berkshire Hathaway HomeServices.
OriginPoint's Gillespie said that his firm sells loans to 11 investors outside Fannie Mae and Freddie Mac that still allow limited reviews, making them the preferred alternative if a building doesn't meet full review requirements.
A lot of lenders, including some of the big banks, don't have that many outlets for a condo loan that fall outside Fannie and Freddie's guidelines, according to Gillespie.
"I expect it [other options] to matter even more after the 15 percent requirement takes effect, since many associations won't be there yet," he added.
A New Normal
At a grassroots level, Benjamin Cohen, a managing director at Guaranteed Rate, said financing for buildings with 10 units or fewer has become faster as they are exempted from the changes.
He also noted the reserve requirement has some gray area which might offer some comfort for associations.
"Come Jan. 4, it's not like HOAs immediately need to have that 15 percent [reserves]. They need to show that going forward, they're budgeting toward that," Cohen said.
He spends much of his time since the rule tweaks hosting breakfast and lunch sessions to educate real estate professionals on the impacts and managing borrower expectations.
He sees this as a short-term pain but a long-term gain for buyers, as it forces buildings to operate in a conservative financial capacity.
The new rules will also push owners to be proactive in their associations and management companies to be more organized in how they provide information, Rosenblum said.
He expects it to eventually become the new normal because of Chicago's housing supply constraints.
"What differentiates Chicago from other cities is that we don't have a pipeline of new [condo] deliveries," Rosenblum said.
Illinois ranks second-to-last in the U.S. for new homebuilding rates, issuing only 157 permits per 100,000 residents from June 2025 to May 2026 , according to a July report by Visual Capitalist.
This supply pressure shows up in the renewed interest for adaptive re-use projects, office-to-residential conversions and new construction in single-family property types.
And new supply continues to be limited by developers grappling with higher interest rates and construction costs, leaving landlords with an upper hand until 2027, the earliest that a significant wave of rental deliveries are expected, TRD previously reported.
Ultimately as a broker, Novakovic hasn't seen evidence that the changes have halted purchase decisions, but as a condo owner, she's hoping to balance fairness and fiscal prudence. "Having sensible HOA fees now will cover not only today's operating costs, but also future replacement costs," she said.
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This article originally appeared on The Real Deal. Click here to read the full story.
