FHA Finance bill: Win for condo buyers
FHA finance bill: win for condo buyers
FHA Finance: It’s no secret that the Federal Housing Administration has been under pressure for several years by housing, community associations, and other groups to revamp its condo finance program.
As of last month, their wishes were granted as the Senate unanimously passed a bill which will require the FHA to make its condo financing regulations less strict and make FHA financed loans more readily available to home buyers with moderate incomes, many of whom are purchasing a home for their first time, as condominiums are the most affordable option.
The Federal Housing Administration, generally known as “FHA”, provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals.
It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.
New bill passed following significant decrease in FHA financed condos
The bill (H.R. 3700) passed following a downfall in FHA-financed condo mortgages. In 2010, the FHA finance was the main source of condo financing for buyers purchasing a home for their first time. It helped finance roughly 90,000 condo mortgages and in the last year the number has dropped to a mere quarter of that figure.
To make matters worse, the FHA placed stringent restrictions on condo communities making eligibility for financing become extremely difficult, so much so that thousands of condo associations fled the program. The Community Associations Institute found that less than ten percent of condo associations are currently eligible for FHA loans.
FHA finance bill seeks to fix key problems
The changes required by the new bill will help correct the following key issues currently facing condo associations and future condo buyers:
- The FHA will be forced to streamline the re-certification process for condo associations and make it easier for them to be in compliance with the government’s regulations.
- The minimum owner-occupancy ratio will be reduced from 50 percent to 35 percent, unless the higher percentage is sufficiently justified by the FHA.
- Exceptions to FHA finance restrictions on commercial space inside condo projects will be allowed. Currently, the limit is set at 25%.
- Transfer fees will be allowed. In the past, the FHA has rejected condominium projects that collect transfer fees when a unit is sold.
- More flexibility will be granted with regards to how much commercial space is allowed in condo developments.
Bill’s success depends on two factors
Although it’s unclear that the changes will be enough to revive the struggling FHA program, it’s a step in the right direction. The success of the new FHA bill will depend on two factors: how fast the FHA puts the procedures into practice, and whether the thousands of condo associations who’ve left the program decide to jump back in.
While the new FHA finance bill is currently in ‘wait and see’ state, there is no doubt that Miami is one of the best markets for prospective condo-owners. Miami has historically been known as a hot vacation destination due to its gorgeous beaches and vibrant nightlife.
Today, it is widely recognized as a top place to live for its rich culture, world-class arts and entertainment, and international commerce. Miami’s having a cultural renaissance and it’s clear there’s never been better time to invest in the magic city.
By Julie Wyatt