FHA rule reversal could boost condo salesMay 23, 2012 @ 8:10 am
The Federal Housing Administration is reportedly considering revising rules that many in the real estate industry have called overly strict and that have left many condo units ineligible for FHA's low-downpayment mortgages.
One sticking point under the FHA's rules has been that "individual condo units cannot be sold to buyers using FHA-insured mortgages unless the property as a whole has been approved for financing," The Wall Street Journal reports.
However, condo association boards are increasingly opting not to obtain recertification of their buildings for FHA loans due to its tightened regulations against condo units.
Half of all condo buyers tend to use FHA mortgages, and it's an important source of lending for first-time and minority home buyers, Christopher L. Gardner, managing member of FHA Pros, a consulting firm that helps condo boards obtain FHA approvals.
Another rule the FHA is reportedly reconsidering is its stance on non-owner occupancy. Now, FHA requires that no more than 50 percent of the units in a condo building be non-owner occupies.
"This rule alone has made large numbers of condominiums in hard-hit markets ineligible for FHA financing, where investors have purchased units for cash to turn into rentals," The Wall Street Journal reports.
FHA also is reportedly revisiting its condo rules on how many owners in a building can be delinquent on their fees. FHA currently refuses to approve a project if more than 15 percent of the condo units are 30 days or more late on their condo association fees, The Wall Street Journal reports.
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