Good News for Condo Owners: FHA to Revise its Rules
There is a buzz going on in the real estate market that Federal Housing Administration (FHA) is preparing amendments to the contentious regulations that have left a huge number of condominium units disqualified for low-down-payment insured mortgages. FHA’s strict rules have distressed a large number of condo residents throughout the U.S., as they are unable to sell their condo units as their condo board has not sought approval from the FHA due to the strict criteria laid down by the agency.
The FHA amendments would aim at removing some of the overly stern policies that had acted as a barrier for the condominium association boards and prevented them from sanctioning approval for FHA loans since last several months. Under FHA’s policies, if you want to sell your individual condo unit to buyers with the help of FHA-insured mortgages, you can do so only if the property as a whole gets approved for financing. Such strict FHA policies have frustrated the realty agents, builders and experts as they are not able to sell their condo units for FHA’s stringent conditions have been preventing the condo board to seek approval from FHA.
There are several rules and regulations that make it difficult for condo owners to obtain FHA approval.
1. FHA rules state that in order to have FHA approval, only half of the condo units located in a building can be non-owner occupied. This is a serious issue as a large number of condos are foreclosed properties and condos are generally targeted as rental properties having great potential.
2. FHA will reject the approval of a building if more than 15 percent of the condo units in a particular building are late by 30 days or more in paying condo fees. This rule also poses a serious problem for thousands of condo associations. With the ever-increasing number of foreclosures, it is no less than a punishment for distressed homeowners.
3. Any ambiguity on FHA sanction applications can lead to strict legal penalty for the officials of condominium board. Consequently, majority of boards stay away from the process of getting FHA approval in the fear of facing harsh penalties.
4. FHA has also set the limit of the total floor space in a condo that can be utilized for commercial purpose. According to FHA only 25% of the entire floor space can be used for business. The limit set by FHA is excessively low as well as unrealistic for condominiums in urban areas where condo units are used for small commercial purposes.
According to the FHA authorities, such requirements are indispensable in order to prevent insurance –fund losses. However, FHA is ready to reassess certain issues that have caused distress to the condo owners in general and the real estate market as a whole. The fact that FHA is likely to simplify its policies to come up with several modifications in the next few months is definitely a breath of fresh air for the distressed condominium buyers as well as sellers.
Eva Peter - About Author:
Jay Raman is the broker of record for The Lion Real Estate Group, a Houston and Dallas area brokerage focused on working with investors and homeowners buy, lease, or sell their property. Jay and his team have been in the investment property and association management business in Houston and Dallas. To get more great articles or ideas, you can also visit the Lion Real Estate Group’s Website, Facebook or Twitter Account.
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