New GSE Rules Highlight Importance Of Dues
For decades, mortgage lenders have routinely escrowed two housing expenses: property taxes and homeowners insurance.
The reason is straightforward. If property taxes go unpaid, the taxing authority can place a superior lien on the property. If homeowners insurance lapses, the lender’s collateral may be inadequately protected after a fire, storm, or other covered loss.
But there’s another recurring housing expense that can also affect homeowners and lenders alike, and it typically isn’t escrowed:
Condominium association fees.
As Fannie Mae and Freddie Mac tighten condominium lending standards, some mortgage professionals are asking whether it’s time to rethink that longstanding practice. Jennifer McGuinness-Lubbert, CEO of Pivot Financial recently brought this issue up in a LinkedIn post and it garnered some spirited commentary.
First, Let’s Clear Up the Terminology
The terms HOA and condominium association are often used interchangeably, but they serve very different purposes.
A traditional homeowners association (HOA) generally governs single-family homes or fee-simple townhomes. Homeowners own and maintain their own house, roof, exterior, and lot. The association typically maintains shared amenities such as private roads, landscaping, playgrounds, pools, and clubhouses.
A condominium association is different.
Condominium owners generally own only the interior of their unit. The association is responsible for maintaining many of the building’s most expensive components, including:
- Roofs
- Exterior walls
- Elevators
- Parking garages
- Structural systems
- Hallways and common areas
- Building mechanical systems
- Master insurance coverage
Because condominium associations maintain the building itself, they generally operate with much larger budgets, maintain reserve funds for future capital repairs, and occasionally levy special assessments.
That’s why the recent changes by Fannie Mae and Freddie Mac primarily affect condominium associations, not traditional HOAs.
Why This Conversation Is Happening Now
Beginning in August 2026, Fannie Mae and Freddie Mac substantially expanded Full Project Reviews for condominium financing while limiting the circumstances under which streamlined reviews may be used. Beginning in January 2027, many condominium associations will also be expected to dedicate at least 15% of annual assessment income toward replacement reserves unless they qualify under updated reserve study provisions.
These changes reflect growing concern over the financial condition of condominium associations.
Across the country, many associations are facing:
- Rising insurance premiums
- Higher insurance deductibles
- Deferred maintenance
- Aging infrastructure
- Increased reserve funding requirements
- More frequent special assessments
Those costs eventually reach homeowners through higher monthly condominium fees or special assessments.
The question some mortgage professionals are now asking is whether recurring condominium association fees should be treated more like property taxes and homeowners insurance.
The Case for Escrowing Condominium Association Fees
Mortgage executive Jennifer McGuinness-Lubbert recently argued that condominium association fees should become part of the mortgage escrow process.
The concept is simple.
Mortgage servicers already collect and pay property taxes and homeowners insurance because missed payments can threaten the mortgage.
Condominium association fees remain largely outside that system.
If a homeowner stops paying their monthly association dues, the mortgage servicer may not learn about the delinquency until significant late fees have accumulated or legal action has begun.
Supporters believe escrow could provide several benefits.
Earlier Detection of Delinquencies
Escrowing recurring condominium association fees would allow servicers to identify missed payments much earlier, potentially helping borrowers resolve problems before liens or foreclosure proceedings begin.
More Predictable Monthly Housing Costs
Association fees regularly increase as insurance premiums, maintenance costs, and reserve funding needs rise.
An annual escrow analysis could gradually adjust monthly payments rather than requiring homeowners to absorb larger increases all at once.
It’s important to note, however, that escrow would generally apply only to recurring association dues. Unexpected special assessments would still typically remain the homeowner’s responsibility.
Greater Protection for Lenders
Mortgage lenders already monitor taxes and insurance because both affect the security of the loan.
Supporters argue that condominium association fees deserve similar attention because unpaid assessments can also create financial and legal complications.
There Are Legitimate Concerns
Not everyone agrees that escrow is the right solution.
Several mortgage professionals responding to the proposal raised practical questions.
How would thousands of self-managed condominium associations communicate fee changes to mortgage servicers?
Who would reconcile payment disputes?
How would borrowers without escrow accounts—or owners who have no mortgage at all—be handled?
Would associations incur additional administrative costs?
These are valid questions.
Supporters counter that mortgage servicers already process millions of tax and insurance payments each year and that modern payment platforms could accommodate association payments with appropriate system upgrades.
Whether those efficiencies would outweigh implementation costs remains an open policy question.
Association Fees Are Rising, but Not at the Same Rate Everywhere
One statistic often cited online claims that “HOA fees increased 44%.”
That figure is misleading because it combines data from different studies measuring entirely different things.
It’s also important to remember that HOAs and condominium associations are not the same, and their financial obligations differ substantially.
Several recent studies help explain the confusion.
- Vantaca, a community association management software company, reported that the median annual assessment among associations using its platform increased approximately 44%. This reflects only the communities within its dataset and should not be interpreted as a nationwide average.
- LendingTree found that 82% of surveyed homeowners living in HOA-governed communities experienced fee increases during the previous three years. Of those respondents, 44% described their increase as “significant.” That measures homeowner experience—not the average percentage increase.
- Realtor.com reported that approximately 43.6% of active home listings include an HOA or condominium association fee. That statistic describes how common association-governed communities have become, not how quickly fees are increasing.
The consistent takeaway isn’t that every association experienced the same increase.
It’s that association costs are rising across much of the country, driven by insurance, labor, construction costs, reserve funding, and deferred maintenance. The magnitude varies considerably from one community to another.
What About Association Liens?
Another reason this discussion has gained attention involves association liens.
In many states, condominium and HOA statutes grant associations a limited “super-priority” lien for a portion of unpaid assessments. The amount of that priority—and its effect on a lender’s mortgage—varies by state.
Contrary to some online claims, these laws do not universally eliminate or “wipe out” a first mortgage. However, they can expose lenders to financial losses and legal complications when association dues remain unpaid.
Supporters of escrow argue that earlier detection of delinquent dues could reduce that risk before liens or foreclosure proceedings begin.
My Take
Escrowing condominium association fees won’t solve every problem facing condominium communities.
- It won’t lower insurance premiums.
- It won’t eliminate deferred maintenance.
- It won’t prevent special assessments.
- Nor will it replace good governance by condominium boards.
But it could eliminate one significant blind spot in mortgage servicing.
The recent changes by Fannie Mae and Freddie Mac acknowledge that the financial health of condominium associations has become an increasingly important component of mortgage risk.
If lenders now closely evaluate reserve funding, insurance coverage, deferred maintenance, structural inspections, and association finances before approving loans, it’s reasonable to ask whether one of the largest recurring housing expenses for condominium owners should continue to exist outside the escrow system.
Whether escrow ultimately becomes industry practice remains uncertain.
But it’s a discussion worth having.
Sources
- Fannie Mae. Lender Letter LL-2026-03: Condominium Project Eligibility Updates (March 18, 2026).
- Freddie Mac. Guide Bulletin 2026-C: Condominium Project Review Updates (March 18, 2026).
- Community Associations Institute (CAI). Summary of 2026 Fannie Mae and Freddie Mac Condominium Policy Changes.
- California Senate Bill 326 (Balcony Inspection Law).
- Uniform Common Interest Ownership Act (UCIOA) and applicable state condominium statutes regarding association lien priority.
- Vantaca. Community association assessment trend data.
- LendingTree. HOA Fee Survey (2025).
- Realtor.com. HOA Fee Trends and Listing Data (2025–2026).
