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To enable more buyers to purchase condominiums, the Federal Housing Administration should eliminate its current restriction against FHA financing in buildings where less than half of the units are owner-occupied, NAHB and three other organizations recently told Robert C. Ryan, the acting assistant secretary for housing and federal housing commissioner at the Department of Housing and Urban Development.
The housing groups — including the Community Associations Institute (CAI), the National Association of Realtors® (NAR) and the Institute of Real Estate Management (IREM) — offered several suggestions in a May 2 letter to Ryan as the FHA makes revisions to its condo mortgage requirements that are expected to be released later this year.
The coalition provided the information to the FHA as part of a regulatory review process for federal agencies initiated by an executive order from the Obama Administration in January.
Five other recommendations were made:
- The FHA should increase or temporarily suspend its limitation of FHA financing to no more than 50% of the purchasers in a condominium community. This would allow more first-time buyers to become home owners, and would increase the number of owner-occupied units in these communities.
- The FHA should reduce or eliminate its current, temporary requirement that at least 30% of a condo community’s total units must be sold before it endorses any mortgage on a unit. The requirement is set to return to a more onerous permanent level of 50% on June 30.
When FHA financing is unavailable, It is far more difficult to sell early condo units, many of which are aimed at first-time home buyers who often can only qualify for an FHA mortgage.
- The current prohibition on an investor owning more than 10% of the units in a development should be increased to a more appropriate level.
In the case of newly built developments, builders or developers should be exempted from the rule so they could rent some of the units they own, which would help stabilize the development instead of allowing units to stand vacant.
- The FHA should adjust its requirement that no more than 15% of units in a condo community be more than 30 days past due in their owners association assessments to a “no greater than 90 days” level, to reflect currently difficult economic conditions.
- The FHA should increase the portion of a mixed-use property’s floor area that can be used for commercial purposes from 25% to 45%.
Combining residential and commercial uses helps reduce sprawl and offers the residents employment opportunities and easier access to products and services.
To read the entire letter, click here.
For more information, email Steve Linville at NAHB, or call him at 800-368-5242 x8597.