With the Department of Housing and Urban Development finalizing new FHA condominium loan policies could mean ownership for more people, according to the National Association of Realtors.
The changes, many of which NAR has been cheer-leading for for years, should yield thousands of new homeownership opportunities and help alleviate affordability restraints impacting markets across the country, it said.
“We are thrilled that Secretary Carson has taken this much-needed step to put the American Dream within reach for thousands of additional families,” said NAR President John Smaby in an NAR press release.“It goes without saying that condominiums are often the most affordable option for first-time homebuyers, small families and those in urban areas. This ruling, which culminates years of collaboration between HUD and NAR, will help reverse recent declines in condo sales and ensure the FHA is fulfilling its primary mission to the American people.”
The new guidance extends certifications from two years to three, allows for single-unit mortgage approvals, provides more flexibility with owner/occupancy ratios, and increases the allowable number of FHA loans in a single project. The rule starts in mid-October – 60 days from publication. HUD believes the changes will extend critical benefits to aspiring homeowners and confirm the agency is properly serving the public.
“NAR is also grateful to Representatives Blaine Luetkemeyer and Emanuel Cleaver, along with Senators Bob Menendez and Tim Scott, who served as the initial sponsors of Congressional legislation that got this process moving toward the resolution we have reached today,” Smaby continued.
During NAR’s most recent existing-home sales report, June condominium and co-op sales were recorded at a seasonally adjusted annual rate of 580,000 units. The figure represents a decline of 3.3 percent from May and a 6.5 percent drop from the same time last year. With more than 8.7 million condo units nationwide, only 17,792 FHA condo loans have been originated in the past year.
NAR Chief Economist Lawrence Yun recently noted that even though median prices for existing condos have risen slightly, their relative affordability means condominiums remain a natural answer to inventory shortages holding back home sales growth.
“Condos are typically more affordable than a detached single-family home, but only a small fraction of condos are FHA-certified,” he said in July in a news release.
In conversations with HUD since 2008, NAR has advocated for changes to FHA’s condo policies that include allowing owner-occupancy level determination on a case-by-case basis, granting up to 45 percent commercial space without documentation and including a five-year approval period for project certification.
The FHA issued proposed changes to its condo rules in 2016 to lift several restrictions within the sector, but the proposed rules were never finalized.
During NAR’s annual legislative conference this May, FHA Commissioner Brian Montgomery noted the agency was closing in on finalizing new condo policies that, by lifting restrictions and streamlining processes, had the potential to significantly boost America’s condo sector.
“We anticipate that the updated regulations will be more flexible, less prescriptive and more reflective of the current market than existing provisions,” Montgomery told the group of more than 100 Realtors in Washington, D.C. earlier this year.
Source: National Association of Realtors