The U.S. Department of Housing and Urban Development is expected to release updated guidance tomorrow on FHA-insured condominium financing. The new rules should benefit your real estate clients and customers by allowing more buyers to obtain low down-payment mortgages on affordable housing options.
Specifically, the new rules will:
Extend FHA certifications on condo developments from two years to three years, reducing the compliance burden on condo boards.
Allow for single-unit mortgage approvals—often known as spot approvals—which will enable FHA insurance of individual condo units, even if the property does not have FHA approval.
Secure additional flexibility in the ratio of investors to owner-occupants allowed for FHA financing in a condo building.
The full guidance will go into effect in mid-October, 60 days from publication.
“Condominiums are often the most affordable option for first time home buyers, small families, and those in urban areas,” said NAR President John Smaby, in a statement issued to the media Wednesday morning. “We are thrilled that (HUD) Secretary (Ben) Carson has taken this much-needed step to put the American dream within reach for thousands of additional families.”
Since 2008, NAR has championed policy changes in condo lending. NAR has sought rules that would allow the owner-occupancy level to be determined on a case-by-case basis and that would extend the approval period for project certification to five years.
NAR’s existing-home sales report for June showed condominium and co-op sales at a seasonally adjusted annual rate of 580,000 units, a decline of 3.3% from May and 6.5% from June 2018. With more than 8.7 million condo units nationwide, only 17,792 FHA condo loans have been originated in the past year.
“This ruling, which culminates years of collaboration between HUD and NAR, will help reverse recent declines in condo sales and ensure the FHA is fulfilling its primary mission to the American people,” Smaby said.
The full rule for single-family condo financing is scheduled to be published in the Federal Register on Aug. 15, 2019, and available online at https://federalregister.gov/d/2019-17213, and on govinfo.gov.