FHA
New FHA Policy Guidelines
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For those of you who live in condominiums, you know how important FHA approval can be. Without such approval, purchasers can have difficulty obtaining financing for purchasing a condo. (After all, FHA-insured mortgages are between 30 and 40 percent of all condominium mortgages, and FHA insurance is typically required on mortgages where there is less than a 20 percent down payment.)
FHA approval requirements have been in flux for many months. Last week the FHA issued a “Consolidation and Update of Approval Requirements” that formalizes many of the requirements. At a minimum under the guidelines, to be eligible for FHA financing a condominium must:
FHA Leasing Waiver Announced!
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FHA Issues Waiver on Leasing Restrictions
Leasing restrictions have been one area of the FHA condominium guidelines that has caused problems for associations seeking to get FHA approvals. CAI has brought this issue to FHA’s attention and has petitioned FHA to review these criteria. On March 18, 2011, FHA issued a waiver that will provide greater flexibility on leasing restrictions under the FHA condominium insurance program. This means that many condominium associations whose FHA approval was rejected due to rental restrictions may now qualify under the FHA waiver.
 FHA Leasing Waiver |
CAI Calls on FHA for Stakeholder Input, Transparency in Condo Guidelines
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Community Association Institute has reached out to the leadership of FHA to express concern over continued problems and mismanagement of the condominium insurance program. The program requires condo associations to get FHA approval for the entire association in order for any buyer to qualify for FHA financing to purchase a condominium unit. As FHA’s share of condominium mortgages has exploded during the housing crisis from less than 5% to 30% of all mortgages, sound underwriting guidelines and administration are critical to ensure appropriate qualification criteria are adopted. To date, FHA has continued to issue guidance with no public notice or stakeholder input. The result is an increasingly troubled program that is needlessly disqualifying healthy condominium associations and burdening homeowners with added compliance costs.
| FHA Letter |
CAI Members Meet with FHA to Discuss Condominiums
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On January 7'h, a delegation of CAl members met with policymakers at the Federal Housing Administration (FHA), presenting the agency with practical difficulties condominium associations face when qualifying for FHA's condominium mortgage insurance program. CAl's member delegation focused on three problem areas that are preventing homeowners in many condominium associations from using FHA programs:
- Deed Restrictions on Investor-Owned Units & Owner Occupancy Requirements
- Lease Term Restrictions and Room Occupancy Limits
- Restrictions on Condominiums with Affordable Housing Units
FHA Fact Sheet
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1. If it isn't an FHA loan being used to purchase a unit, chances are the buyer is an investor. Because over 80% of buyers are now using FHA loans, the remaining buyers are usually investors who cannot use an FHA loan to purchase. An investor brings in renters to units, including Section 8.
2. FHA loans used to be for the downtrodden. Now almost everyone uses FHA loans to purchase their homes. Look at these numbers:
a. FHA loans can be used for loans up to $729,750 on condominiums
b. The median credit score for an FHA loan used to be around 640, it now is approaching 700.
c. FHA buyers are all fully documented buyers. There are no stated income programs or lite-doc programs. This means that the buyers have proved both income and assets to qualify for their purchase.
3. To use an FHA Loan your HOA must be FHA approved. Previously very few condo associations became FHA approved. An individual unit owner could apply for a 'spot' approval, one that was done at the time of purchase. This approval was only good for that unit and every time a new unit was sold the unit owner had to apply for this 'spot' approval. This process was outlawed in February of this year.
4. All previously FHA approved condo associations were 'grandfathered' in with the new regulations. However, each of these associations must be re-approved in 2010.
5. HUD's passage of these new regulations will impact the value of your association by making it more or less desirable to buyers. FHA approved associations will be worth more. Non-approved FHA associations will be worth less.
