The still struggling condominium market may get a boost due to actions taken by the Federal Housing Administration (FHA).
FHA issued new mortgage guidance for FHA insured condominium loans that could significantly affect condo financing and boost the housing recovery. Since the housing crisis began, FHA’s share of condominium mortgages has expanded from less than 5 percent to 30 percent or more in some markets, and nervous banks have been applying FHA criteria to non-condo loans.
For the past three years, condominium associations have been struggling to meet stringent qualifications imposed on condominiums in order for any potential buyer to get FHA financing.
FHA has played both a critical role in fostering the condo market recovery and simultaneously, holding it back because their standards for associations were unrealistic.
FHA’s new guidance adds greater flexibility for associations to meet FHA financial standards for condominiums. Prior to the new guidance, any condominium association with more than 15 percent of units 30 days in arrears would be disqualified for the FHA program, which provides up to 30 percent of available condo mortgages. FHA also would not lend to a mixed use development with more than 25 percent commercial space, which crippled popular mixed-use, transition oriented developments in urban centers. FHA also imposed a requirement that the condominium board had to keep FHA informed of any disputes within the community that could impact borrower’s ability to repay mortgages. These criteria led many boards to decide to forego FHA approvals thus limiting financing options for potential buyers.
Under the new guidelines, condominium associations will have more flexibility to qualify for FHA backed mortgages. FHA will now measure delinquencies under a 60-day standard, allow for more mixed use developments, and have relaxed ongoing reporting requirements.
These new standards will open the door for more communities to qualify and provide more lending options for consumers. This is good news for the condo market across the country.
Andrew Fortin
VP Government & Public Affairs
Associa
Dallas, TX
This article is provided by Associa Living.