It took an Act of Congress!
But, more condominiums are soon expected to be approved by the Federal Housing Administration (FHA). Only condominium owners in FHA-approved condo associations are eligible for loans insured by the FHA. These loans offer borrowers lower down payments and more lenient credit criteria.
Under the Home Opportunity Through Modernization Act, passed unanimously by Congress and signed into law in late July, 2016, the number of owner-occupied units allowed will be lowered from 50 percent to 35 percent of units unless the FHA promptly adopts guidance to support a higher number of owner-occupied units in a condominium.
The new law also prohibits FHA from denying approval to a condominium because the condo imposes transfer fees to fund condominium operations. Instead, the FHA policy on private transfer fee covenants must conform to the less restrictive standards of the Federal Housing Finance Agency (FHFA) for the purchase of loans by Fannie Mae and Freddie Mac. And, the FHA is encouraged to approve more mixed-use condos with both residential and commercial units.
For condos seeking renewal of its FHA-approved status, the FHA is now required to make condo recertification “substantially less burdensome”.
New FHA rules and guidelines are expected in the coming months in order to implement the congressional directive to make it easier for condominium associations to obtain and keep FHA-approval, making FHA-insured loans available to more condo unit owners and purchasers.
Posted by Thomas Schild Law Group, LLC, attorneys for condominiums, homeowner associations, and housing coops in the Maryland Counties of Montgomery County, Prince George’s County, Howard County, Frederick County, and in Washington, D.C.