Condo policies to become more lenient, increasing potential buying option for more borrowers The Federal Housing Administration last month announced that it would make changes to its condominium policies, easing the way for many potential buyers to get into a new home.
The changes, long advocated by the National Association of Realtors, include changes to the FHA’s lengthy, complex recertification process; burdensome owner-occupancy requirements; and limits on the types of property insurance that are considered acceptable coverage under FHA’s rules.
Among NAR’s recommended changes:
Eliminate the owner-occupancy ratio. Currently, a building requires a 50-percent owner-occupancy for a buyer to qualify for FHA financing, leaving many potential homebuyers to look at properties in locations or communities that don’t meet their needs. Increase the concentration of building units insured by the FHA to 100 percent. Currently, only 50 percent of a building can be occupied by FHA-insured loans, which often is the only financing available to likely condo purchasers like first-time homebuyers. Removing the limit could make available more potential units to credit-worthy borrowers.
Ease the certification requirements. The Department of Housing and Urban Development certification language often requires attorney advice, and many condo boards find the process much too complicated.
Increase flexibility on past-due homeowner’s association fees. Currently, no more than 15 percent of units can be more than 60 days past due on HOA fees. The NAR wants to increase this time period to 90 days.
Speaking at the Realtors Conference and Expo on Nov. 12, Ed Golding, the FHA’s principal deputy assistant secretary, said changes related to insurance and recertification would take place immediately as part of a Mortgagee Letter that was released the following day. Policy changes related to owner occupancy, commercial space percentage, FHA concentration and spot approvals would be addressed in a future formal rulemaking, he added.
“Condos are often the most affordable option for homebuyers, especially first-time buyers, and making sure FHA financing is an option is important to supporting homeownership,” Chris Polychron, NAR president, said in a statement.
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