It has been nearly one month to the date since the Federal Housing Administration proposed new rules that could make it easier for condo-dwelling seniors to obtain reverse mortgages. With the public comment period underway, various stakeholders are voicing their support for the pending proposals.
The 43-page proposed rule introduced late September includes a provision that would allow individual condo units to become eligible for FHA financing even if the entire complex is not agency certified—a move that is reminiscent of the agency’s former “spot approvals” process.
FHA has been under pressure over the years from mortgage industry and homeownership advocacy groups to update its guidelines on condominium financing, particularly in regards to making the certification process less burdensome for condo projects seeking eligibility to provide FHA loans to their inhabitants.
Condos, which are often popular housing options for many younger and first-time homebuyers, are also viable living arrangements for older homeowners who seek a more active and urban lifestyle, or a more maintenance-free quality of life. Current blanket certification policies, however, have restricted not only many would-be buyers from purchasing condo units, but have also hindered the ability of seniors to continue living in these housing developments.
Since condos are subject to an all-or-none approval process, where the entire complex must be certified for FHA financing as opposed to a unit-by-unit basis, seniors have been largely shut out from being able to tap one of the greatest assets they possess: housing wealth.
Such is the case for Pamela Ward, 63, who bought a condo in Venice, Fla., two years ago. Her plan was to eventually get a reverse mortgage to help pay for the costs of her everyday needs, including utilities, food and also HOA fees—expenses that, she says, her Social Security income will not be able to cover by itself.
“Therefore, I planned to use the equity that I have in this home to augment that income and be able to live here for many years to come,” Ward stated in a submitted comment on FHA’s condo proposals published at Regulations.gov.
To Ward’s dismay, her condo complex, Farmington Vistas, is not certified to provide FHA financing. By her account, there is just one 24-unit condo complex that currently has such approval at this time.
In Venice, where 57% of residents are age 65 or older, according to U.S. Census Bureau data, there are likely others in similar situations as Ward; seniors living condos who could potentially benefit from using a reverse mortgage to supplement their retirement spending, but are prevented from doing so due to their condo’s lack of FHA financing.
“The ability to apply for a reverse mortgage based on individual viability rather than blanket rules to a whole complex is much more democratic and would logically help the economy as a whole [as] more people will have cash flow to spend on not only needs but some wants as well,” Ward stated.
In some cases, the hassle of gaining eligibility for FHA financing has deterred homeowners associations (HOAs) from even considering applying for certification.
When Roselee Maddaloni, 68, a Catholic school principal in the Archdiocese of Philadelphia, wanted to avail herself of a reverse mortgage to prepare for retirement, it wasn’t until she was far along in the application process that she found out her condo was not approved by the Department of Housing and Urban Development (HUD) to permit FHA financing.
“I called the association and they assured me that it was,” Maddaloni stated in her comment to FHA. “Later, I learned that two months prior to completion of my reverse mortgage, the Condo Association discontinued the HUD certification. They never informed the homeowners, nor have they done so since.
Maddaloni’s HOA told her that renewal of HUD certification was “too expensive and not in their budget.” She even volunteered to pay for the complex’s efforts to gain FHA approval, but to no avail.
“I believe this is unfair that seniors living in condominiums cannot avail themselves of the opportunities provided to everyone else because of the unilateral decisions of condo associations,” Maddaloni wrote. “Naturally, this derailed my plans for the future.”
Anyone interested in commenting on FHA’s proposed rule, including the agency’s proposal to approve individual condo units for FHA financing, has until November 28, 2016 to submit comments at Regulations.gov here.
Written by Jason Oliva