A shift in FHA’s condo requirements
At last year’s National Association of Realtors (NAR) Conference and Expo, Federal Housing Administration (FHA) Principal Deputy Assistant Secretary Edward Golding announced a shift toward a lower owner-occupancy rate requirement on condominiums, something NAR has long fought for.
Today, the FHA issued a mortgagee letter signed by Golding, lowering the owner-occupancy requirement for existing condominiums from 50 to 35 percent, effective immediately.
But there are some strings…
The FHA says the requirements are necessary in order to “maintain the stability of the Mutual Mortgage Insurance Fund” (MMIF). However, lowering the requirement to 35 percent does not threaten the MMIF if other requirements are met, such as “higher reserves, a low percentage of association dues in arrears, and evidence of long-term financial stability (as evidenced by financial documents).”
For proposed, under construction (including existing projects less than 12 months old), or gut rehab conversions, the FHA will allow a minimum owner-occupancy percentage of 30 percent of the declared units.
NAR calls this a big step
Jon Boughtin, Public Issues Media Manager, Media Communications at NAR tells The Real Daily, “NAR still believes the 35 percent owner-occupancy requirement should apply to all condos, and we’ll continue to make that case as FHA moves forward with the rulemaking process that’s currently underway, but from our perspective this is a big leap forward.”
“We’ll also continue to work with them to address transfer fees, commercial space requirements, and other pending issues related to condo approval,” Boughtin added.
NAR President Tom Salomone asserted, “NAR has been fighting for changes to FHA’s condominium rules for years, and the mortgagee letter announced will bring some much needed relief to the market.
Condominiums will have a much easier time getting certified by FHA, and Realtors® will have more options for clients looking to purchase a condo with an FHA mortgage.”
“This is a big win for NAR, and while we believe all condominiums should have the rules applied to them equally, we also believe FHA has heard the concerns of Realtors® and is moving in the right direction,” Salomone concluded.