FHA temporarily eases guidance on condo approvals
The Federal Housing Administration eased some requirements for financing the purchase of condominium units through August 2014, according to a letter sent to lenders Thursday.
The new guidance is effective for all project approvals or reconsiderations submitted for review going forward.
To protect the dwindling emergency insurance fund, the FHA put stricter rules in place.
According to the changes made Thursday, no more than 15% of the total units can be delinquent by 60 days or more on their condo association fees. This was eased from a 30-day delinquency threshold. No exceptions to the new rule will be granted, the FHA said.
The agency still requires at least half of the units to be owner-occupied for projects completed more than one year ago. But the FHA released more specific guidance on how much investors can own on properties under construction or conversion. Investors can own up to 30% of the units on some of the projects in order to qualify for FHA financing.
Other guidance was given on insurance coverage, commercial space limitations and other details.
The Community Associations Institute, a trade group of community associations, pushed the FHA to revise the rules.
"It was determined that certain policy adjustments were needed to address current housing market conditions," the FHA said in the letter.
CAI Chief Executive Officer Thomas Skiba said the revisions were needed sooner but is still "excellent news."
"FHA has responded to the critical issues we've raised. By doing so, more Americans can obtain FHA-insured mortgages to purchase condominiums," Skiba said. "This will spark home sales and help tens of thousands of condominium communities begin to recover from the housing slump, and that can only help the national economy."