FHA's new rules: more pain for condo market

Calculated phasedown under way?

Is the Federal Housing Administration taking a back-door exit away from condos — a key real estate segment in which it’s recently built up market shares of 40 percent and higher in many urban areas?

Could the agency be tightening its rules in order to cut loan volume in the months ahead, potentially putting housands of unit sellers, buyers, homeowners associations and realty agents in a mortgage-money squeeze?

FHA adamantly denies that it’s doing anything of the sort, and insists that new rules rolled out at the end of last month represent prudent responses to the serious risks the agency’s insurance funds confront.

But condo industry executives and community managers say FHA’s tougher regulations have a wet-blanket effect on associations’ ability — and willingness — to get their projects approved for financings by the agency. Without an entire project certified, potential buyers of units cannot obtain FHA-backed loans, which in turn makes it more difficult for current unit owners to sell and could depress property values.