FHA To Change Up Condo Lending Requirements?

The Federal Housing Administration indicated this week that it is in the process of evaluating changes to its condo lending requirements, according to a statement provided to Housing Wire.

“While we are evaluating potential changes to our condo requirements and expect to announce some of those soon, we cannot yet comment on specific requirements that may be included in any potential changes,” a HUD spokesman told Housing Wire in a statement on Monday.

FHA’s condo requirements currently specify that there may not be any new loans in condo developments with more than 15% of the units being more than 30 days delinquent on condo association fees unless the building meets additional criteria. Another rule specifies that in order for FHA to insure a condo loan, more than half of the units in its building must be owner-occupied for buildings built a year ago, with a single investor not owning more than 10% of the units.

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Trade groups have urged FHA to reconsider its guidelines regarding condo units, especially in light of the economic downturn. The Community Associations Institute, the President of the Institute of Real Estate Management, National Association of Home Builders, and National Association of REALTORS® jointly wrote a letter to the U.S. Department of Housing and Development suggesting several “enhancements” to FHA’s condominium requirements last year.

FHA has not indicated when it will make announcements regarding upcoming changes.

Written by Elizabeth Ecker

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  • Potential life changing for a handful of folks I know where the late fees are more than 15 but less than 20% and has been this way for past 12 or more months, its always the same folks.  They all eventually pay but are hardly on time.  I applaud “some” make sense changes.

  • Condo owners and potential buyers have suffered because the FHA made it nearly impossible to get a forward OR reverse mortgage, further depressing values, particularly in areas with high concentration (like here in Florida).  I vote we go back to the spot condo affadavit and help these folks.

    • beaches 21,

      What you present is a matter of more risk to the HECM portion of the MMI Fund.  That might work if that fund was more flush.  To get to a $1.3 billion value of the outstanding HECMs covered by the MMI Fund, not only was the valuation method changed but HUD also had to transfer over $2.2 billion from MMI Capital Reserves to the HECM portion of the MMI Fund.

      While we all want to help more seniors, to do so recklessly could harm the program in the future.  Congressional scrutiny regarding the program seems to be more intense with some academians testifying that HUD should reduce the lending limit and take other actions to reduce endorsement volume even more in anticipation of the market replacing HECMs with proprietary products.   

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