Thousands of condo unit owners and buyers around the country could soon be in line for some welcome news on housing financing: Though officials are mum on specifics, the Federal Housing Administration is readying changes to its controversial condominium rules that have rendered large numbers of units ineligible for low down-payment insured home loans. The revisions could remove at least some of the obstacles that have dissuaded condominium homeowner association boards from seeking FHA approvals or recertifications of their buildings for FHA loans during the past 18 months. Under the agency’s regulations, individual condo units in a building cannot be sold to buyers using FHA insured loans unless the property as a whole has been approved for financing.
According to condominium experts, realty agents, lenders and builders, FHA’s rules have become overly strict and have cut off unit buyers from their best source funds, thereby frustrating the real estate recovery that the Obama administration says it advocates. Christopher L. Gardner, managing member of FHA Pros, LLC, a national consulting firm based in Northridge, Calif., that assists condo boards to obtain FHA approvals, said barely 25 percent of all condo projects that are potentially eligible for FHA financing are now approved. That is despite the fact, says Gardner, that FHA financing is the No. 1 choice for half of all condo buyers and is crucial to first-time and minority purchasers. Moe Veissi, president of the National Association of Realtors and a broker in Miami, says FHA’s strict rules “have had an enormous impact on individuals” across the country, especially residents of condo projects who suddenly find they are unable to sell their units because their condo board has not sought or obtained approval from FHA as the result of objections to the agency’s strict criteria. This, in turn, depresses the prices unit owners can obtain and ultimately, said Veissi, harms their equity holdings and financial futures.
FHA officials defend their requirements as prudent and necessary to avoid insurance fund losses, but have expressed a willingness to reconsider some of the issues that have upset condo owners and the real estate industry.
Source: Ken Harney, The Washington Post