Contrary to its past position on FHA lending guidelines for condominiums, last Friday (July 15, 2016) the Senate passed the Housing Opportunity Through Modernization Act (HR 3700) , and it is now sitting on President Obama’s desk for signature.
The Housing Opportunity through Modernization Act has three major components including amendments to (i) the Section 8 Housing Assistance; (ii) FHA’s requirements for condominium mortgage insurance; and (iii) the Department of Agriculture’s single family housing guaranteed loan program. While all three components are important, the area that impacts condominium associations the most is the modifications to the FHA’s requirements for condominium financing. These amendments include:
- Making it substantially easier to re-certify a condominium project by permitting updating of information rather than resubmitting the required information and requiring FHA to consider increasing the number of years between resubmittals;
- Relaxing the FHA’s existing rule against transfer fees related to the sale of the condominium unit; and
- Reducing the owner occupancy requirement in condominiums from 50% to just 35%.
While not all of these provisions, such as the decrease in the owner occupancy rates, may be popular, the effect of H.R. 3700 will be to ease lending guidelines for condominium projects allowing for greater sales and uses of the properties which, overall, will be a very good thing.