The Department of Housing and Urban Development has been dragging its feet on finalizing its rules for condos that can receive financing from the Federal Housing Administration, and industry groups have had enough.
On Wednesday, the National Association of Realtors issued a letter to HUD Secretary Ben Carson urging him to issue the long-awaited final rule.
“For far too long, worthy borrowers have been unable to purchase the home of their choosing because of FHA’s unfairly restrictive rules on condominiums,” NAR stated. “Ten years is far too long for this problem to have endured, stifling the U.S. housing market and our overall economy.”
NAR said there are approximately 145,000 to 155,000 condominium developments in the U.S., and that homeowners in many of these buildings are shut out of FHA financing under the current rule.
Only 9,427 of the 52,410 applications submitted for FHA approval were accepted, NAR said, pointing to Florida’s Miami-Dade County as a prime example of the problem. There are 5,683 condominium projects in that county, but only seven have FHA approval, representing just 0.0012%.
In 2009, FHA restricted its condo approval process, limiting the number of properties that could receive FHA loans.
But in 2016, FHA caved to pressure from trade groups and members of Congress who insisted that too many first-time homebuyers, seniors and urban residents were being negatively impacted by the current rule. It issued a proposal that would lift a number of restrictions, streamline the recertification process and bring back spot approval for condos in non-certified developments.
But apparently, that’s where the progress stopped.
The National Reverse Mortgage Lenders Association joined NAR in its call to FHA to finalize its proposed condo rules.
For condo-owning seniors who want to access their home equity through a reverse mortgage, the process is time-consuming, costly and quite often, unsuccessful.
“NRMLA, and its members, strongly support HUD’s proposed changes in the area of condominium project approvals and recertifications,” NRMLA Executive Vice President Steve Irwin said. “We look forward to the publication of HUD’s new guidance so that our members might meet the pent-up demand of those seniors who own condominiums, yet need to leverage their home equity so they might effectively age in place.”