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Long Awaited HUD Condo Rules Have Been Released

The U.S. Department of Housing and Urban Development has released rules on FHA-insured condominium financing. The new rules should benefit your real estate clients and customers by allowing more buyers to obtain low down-payment mortgages on affordable housing options.

2019 OKCMAR President Becky Karpe said, “Exciting news from HUD that opens up more options in financing for condominiums! With these recently announced changes to lending policies for condos, we will see an increase in available and affordable options for homeownership in the OKC metro area. This will strengthen both our local real estate market and the opportunities for more of our city’s residents to enjoy the benefits of owning their own home.”

The full rule for single-family condo financing is available on the Federal Register and on govinfo.gov.
Specifically, the new rules will:

·         Extend FHA certifications on condo developments from two years to three years, reducing the compliance burden on condo boards.

·         Allow for single-unit mortgage approvals—often known as spot approvals—which will enable FHA insurance of individual condo units, even if the property does not have FHA approval.

·         Secure additional flexibility in the ratio of investors to owner-occupants allowed for FHA financing in a condo building.

The full guidance will go into effect in mid-October, 60 days from publication. 

“Condominiums are often the most affordable option for first time home buyers, small families, and those in urban areas,” said NAR President John Smaby, in a statement issued to the media Wednesday morning. “We are thrilled that (HUD) Secretary (Ben) Carson has taken this much-needed step to put the American dream within reach for thousands of additional families.”

According to Federal Housing Commissioner Brian Montgomery, the changes are designed to aid first-time homeowners, minorities and seniors. Unlike conventional mortgages that require 20% down, the FHA-backed loans require 3.5% down payments.

Roughly 20 percent fewer minorities — including African Americans and Latinos — own homes than in the general population, said Montgomery. “Minorities were disproportionately impacted during and after the financial crisis a decade ago. While we are seeing great strides in the economy, many are still recovering.”  

Since 2008, NAR has championed policy changes in condo lending. NAR has sought rules that would allow the owner-occupancy level to be determined on a case-by-case basis and that would extend the approval period for project certification to five years. 

NAR’s existing-home sales report for June showed condominium and co-op sales at a seasonally adjusted annual rate of 580,000 units, a decline of 3.3% from May and 6.5% from June 2018. With more than 8.7 million condo units nationwide, only 17,792 FHA condo loans have been originated in the past year.

For more information on the release of these rules, as well as the most current homeownership issues, visit homeownershipmatters.realtor.

 

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