By Richard S. Ekimoto, Esq.

On March 18, 2026, Fannie Mae and Freddie Mac announced changes to their lending guidelines in Lender Letter LL-2026-03.¹ There are a number of changes announced in the Lender Letter, some of which will be discussed in later posts. This post focuses on the changes to the reserve requirements for condominium projects.

The Fannie Mae and Freddie Mac changes to their reserve requirements for condominium associations includes:

• Budgets for condominium associations must have reserve contributions equal to at least 15% of their annual budgeted income assessment.  This is up from the current 10% requirement.  The new 15% requirement will be effective on January 4, 2027. 
• If the condominium association doesn’t meet the annual reserve contribution requirement (currently at least 10%, but increasing to at least 15% on January 4, 2027), it must have a reserve study demonstrating that it has sufficient reserves.  Sufficient reserves is the highest recommended reserve allocation amount in the reserve study.  More importantly, the baseline funding method does not qualify for sufficient reserves.  The baseline funding method is the “option that allows the reserve cash balance to approach but never fall below zero.”  In Hawaii, baseline funding method is referred to as “cash flow analysis”. In other words, cash flow analysis, will not be allowed by Fannie Mae and Freddie Mac unless the association is funding reserves at the 10% or 15% requirement. Fannie Mae and Freddie Mac are encouraging its lenders to implement the requirements for sufficient reserves immediately, however, they must do so no later than August 3, 2026. 

Hawaii condominium associations are required by Hawaii Revised Statutes (“HRS”) §514B-148(a)(5) to conduct a reserve study. HRS §514B-148(a)(8) allows the reserve funds to be calculated on a “per cent funded or cash flow plan”. However, in light of the Fannie Mae and Freddie Mac guidelines, any unit in a condominium association that relies on a cash flow plan to meet the statutory reserve requirements would not qualify for Fannie Mae and Freddie Mac loans unless the association is reserving at the 10% funding requirement or next year’s increased 15% funding requirement. Not being qualified for standard Fannie Mae or Freddie Mac loans may have an adverse effect on association members’ ability to obtain loans or sell their units.

Fannie Mae and Freddie Mac back about 75% of all residential mortgage loans in the United States. The percentages are probably slightly lower in Hawaii. However, some lenders rely on the Fannie Mae and Freddie Mac guidelines even if they do not plan to sell their loans to Fannie Mae or Freddie Mac.

Condominium association should check whether their current budget meets the current 10% funding requirement and the impact the changes to reserve requirements by Fannie Mae and Freddie Mac might affect unit mortgages in the Project. Since lenders have been encouraged to implement the new reserve requirements immediately, your project may soon be disqualified for Fannie Mae and Freddie Mac loans. In addition, when developing next year’s budget, condominium associations should consider the impact of both these changes by Fannie Mae and Freddie Mac.

Condominium associations should also check the funding recommendations in their reserve study. If the association’s reserve study includes a recommendation for both of the two statutory requirements for replacement reserves (cash flow funding at 100% and 50% funding on a percent funded basis) and the Association does not meet the 10% funding requirement or next year’s 15 funding requirement, the association would need to meet the 50% funding recommendation to qualify for Fannie Mae and Freddie Mac loans for its members. Moreover, if it also includes a recommendation for say 60% funding on a percent funded basis, the association would need to comply with the 60% funding recommendation unless the association reserved at the 10% or 15% level.

1. Although the Lender Letter was issued by Fannie Mae, it also states that the “changes are in alignment with Freddie Mac and in coordination with U.S. Federal Housing (FHFA)”. ↩︎

Update 3/23/2026: Clarified that the 10% and 15% requirements are minimums and added last paragraph about reserve study funding recommendations.

By Richard S. Ekimoto, Esq.

On Friday, March 21, 2025, FinCen issued a press release on an interim final rule Removing United States Companies and Persons from the BOI Reporting Requirements. The Final Interim Rule and Explanation is posted here.

The stated basis of the Interim Final Rule is:

FinCEN has determined that an interim final rule is the appropriate mechanism to exempt
domestic reporting companies and United States Persons who are beneficial owners of foreign reporting
companies from the BOI reporting requirements pending the receipt of comments and issuance
of a final rule.

The Interim Final Rule amends the definition of “Reporting company” in 31 CFR 1010.381(c)(1) by removing domestic reporting companies, leaving only what were previously defined as foreign reporting companies within the scope of the regulation. In addition, the Interim Final Rule adds a 24th exemption to 31 CFR 1010.381(c)(2) for any domestic entity. The Interim Final Rule also adds an exemption for Beneficial Owners in 31 CFR 1010.38(d)(4). Under this exemption, any Reporting Company (which is now only foreign entities doing business in the United States) are not required to report the beneficial ownership information of any United States Persons who are beneficial owners. A United States Person is defined under the CTA as a citizen or resident of the United States, a domestic partnership, a domestic corporation, any estate (other than a foreign estate), and a domestic trust meeting certain requirements. The Interim Final Rule is effective immediately.

It’s not clear whether the Interim Final Rule is consistent with the statutory language of the Corporate Transparency Act. Nothing in the CTA indicates that the law was intended to apply only to foreign entities or to exclude beneficial owners that are U.S. Persons. However, since the stated purpose of the Interim Final Rule is to exempt United States companies and persons from the BOI Reporting Requirements pending the receipt of comments and issuance of a final rule, it is likely that the Interim Final Rule would be allowed to stand for now. In any event, FinCen has stated that no fines or enforcement would occur against domestic companies or United States Persons.

Community associations that have not filed their BOI Report should wait before filing its BOI Reports.

By Richard S. Ekimoto, Esq.

Yesterday, the U. S. Treasury Department issues a press release stating that it will not enforce the BOI Reporting Requirements against U.S. citizens and domestic reporting companies. The press release states, “not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either.” The information has not yet been updated on the Fincen website.

If the U. S. Treasury Department follows through, community associations in the United States would not be subject to penalties or enforcement actions for failing to file BOI Reports. Technically, the CTA still applies to domestic reporting companies and U.S. Citizens to file BOI Reports unless they qualify for one of the twenty-three (23) exemptions. However, the announcement would mean that there would be no penalties for violations or any enforcement of the law for U. S. citizens or domestic entities. Hopefully, FinCen will also consider revisions to its regulations to expand the number of entities exempt from the BOI Reporting Requirements.

Community associations that have not yet filed their BOI Report should refrain from doing so at this time.

By Richard S. Ekimoto, Esq.

Today, FinCen posted a news release that it will not issue any fines or other penalties for any entity that does not file a BOI Report until new interim rules are adopted. Before March 21, 2025, FinCen intends to issue interim rules that will extend the deadline for filing BOI Reports. In addition, FinCen intends to solicit public comment on potential revisions to existing BOI Reporting requirements. Those comments will be considered by FinCen in adopting changes to the BOI Reporting requirements, including further modifications to the deadlines.

Any community associations that have not filed their BOI Report should wait until after FinCen established a new deadline and potentially new requirements for which entities qualify as reporting companies.

By Richard S. Ekimoto, Esq.

The Federal District Court lifted the injunction preventing enforcement of the CTA in the Smith v. U. S. Department of the Treasury case. The injunction was lifted by the Federal District Court in light of the U.S. Supreme Court’s ruling in the McHenry v. Texas Top Cop Shop, Inc. case. However, FinCen issued a notice that it would extend the deadline to file the BOI Reporting deadline by 30-days from today, February 19, 2025. FinCen says that the new deadline is March 21, 2025. One of the stated purposes of the extension is to allow the U.S. Treasury Department to “assess its options to further modify deadlines while prioritizing reporting for those entities that pose the most significant national security risks.”

In addition, Congress is considering a bill to delay the DOI Reporting deadline until January 1, 2026. The U.S. House of Representatives has passed the bill and is pending in the U.S. Senate.

Community associations that have not yet filed their BOI Report may wish to wait until FinCen completes its assessment whether further extensions are necessary and whether changes to the reporting requirements will be made to focus on entities that pose the greatest risk to national security.