FHA Relaxes Condo Guidelines Temporarily

By Stevie Duffin Updated on 12/14/2012

By Daniel Duffield

ccording to a letter addressed to lenders on Thursday, the Federal Housing Administration (FHA) relaxed some of the FHA qualifications regarding the purchase of condos until August 2014.

This new regulation applies to projects being submitted for review and takes effect immediately.

In order to save the diminishing insurance fund, the FHA had enforced a strict policy with respect to condos.

With the changes enacted on Thursday, a maximum of 15% of total units can be considered delinquent my 60 or more days on condo association charges. This policy demonstrates a relaxing of the previously held 30-day delinquency deadline. According to the FHA, no exceptions to this new rule will be permitted.

The FHA still mandates that a minimum of half the units be owner-occupied for projects completed over a year ago. However, the FHA also created more specific rules limiting the amount investors can own on properties currently under construction or being converted. According to the new regulations, investors may own a maximum of 30% of the units and still qualify for FHA mortgage financing.

Other guidelines have been put in place regulating insurance coverage, commercial space limitations, and other specifics.

The Community Associations Institute (CAI) a trade organization of community associations, put pressure on the Federal Housing Administration to reform the current rules.

In the letter issued on Thursday, the FHA stated that these policy adjustments were crucial in accommodating the changing housing market conditions.

According to CAI Chief Executive Officer Thomas Skiba, the revisions could have come sooner but their onset is “excellent news.”

Skiba continued to say that the FHA has adequately responded to the various issues that they have drawn attention to. In doing so, Skiba says that more Americans will be able to acquire FHA mortgage loans in order to purchase condominiums. Skiba believes that this will stimulate home sales and help to recover thousands of communities of condos which have suffered during the housing market decline. “That can only help the national economy,” said Skiba.