For a decade, NAR has urged the Federal Housing Administration to make it easier for condo buyers to qualify for FHA-insured mortgages. Now the FHA is making progress on this front.
For a decade, NAR has urged the Federal Housing Administration (FHA) to make it easier for condo buyers to qualify for FHA-insured mortgages.
So the trade group was pleased to hear acting Department of Housing and Urban Development Deputy Secretary Brian Montgomery state Thursday that the FHA is making progress on this front.
“As you all know, one opportunity is condominiums, which have been traditionally a mainstay of affordable housing for both first-time homeowners and seniors,” Montgomery told NAR representatives last week as thousands of the trade group’s members convened in Washington D.C. for the annual Realtors Legislative Meetings & Trade Expo.
He went on to say that HUD has “been in the process of revising our condominium project approval requirements to get to a final rule and update our policies.”
The FHA rule is under review by the Office of Management, and the end of the process is in sight, Montgomery added, according to NAR.
The proposed rule involves loosening requirements that must be met for borrowers to use FHA-insured mortgages to buy condo units.
NAR said it supports the new rule, including provisions that:
- relax guidelines that require condominium projects to have a certain level of owner-occupied units in order to qualify for FHA financing;
- allow condo projects with up to 45 percent commercial space to be eligible for FHA financing; and
- streamline the FHA financing certification process for condo projects, by enacting a “five-year approval period for project certification.”
In 2009, the FHA restricted the type of condominium projects whose units could be purchased with loans insured by Federal Housing Administration, NAR noted in a February letter. The letter called for the FHA to lift the restrictions.
Those restrictions meant only 9,400 of 52,400 applications from condo projects for FHA eligibility received approval, according to NAR.
But Montgomery reportedly assured the trade group that HUD is coming closer to cutting the red tape.
“We anticipate that the updated regulations will be more flexible, less prescriptive and more reflective of the current market than existing provisions,” Montgomery said, according to NAR. “It may also include single unit approvals for loans that meet HUD standards for unapproved projects, allowing HUD to set the specific percentage.”
In the meeting with NAR representatives, Montgomery also emphasized the need for housing deregulation by HUD, as well as state and local governments, to “mitigate affordability constraints.”
“The combination of regulatory overreach and an aging housing stock has meant not enough affordable units are left – or worse, being built,” NAR quoted Montgomery as saying.
“Zoning, environmental and sometimes labor restrictions have made it more difficult for areas across the country to meet the growing [housing] demand.”