Today’s news is a major and positive change.
History: If someone wants FHA financing for a condo, not only do they have to be approved for the loan, but the condo itself has to have been “certified.” In 2011, FHA, tired of having so many delinquent and foreclosed condos on its books, de-certified all of them and required all of them to reapply. The problems:
(1) not every condo board went through the trouble, either because of laziness, confusion, or fear of making a mistake on the paperwork (the regulation threatened prison terms for inaccuracies);
(2) the condo requirements were made more onerous. For example, at least half the units had to be owner-occupied, no more than 15 percent of owners could be delinquent on their condo fees (defined as 30 or more days behind), and three-quarters of the space had to be residential.
No recertification, no FHA loans for potential buyers. Fewer potential buyers, prices tank. Commence uproar by buyers, sellers, Realtors and lenders.
So, the new rules: investors can own up to half of the units (not just 10 percent), and half the space can be commercial (instead of 25 percent). And delinquency is now defined as 60 or more days behind on condo fees instead of 30.
Some significant hurdles remain. Half a project’s units must still be owner-occupied, although the rule is waived for foreclosed units. Only half of a condominium’s units can be financed through FHA. And the boards are still liable for incorrect information, although less so if they’re following attorneys’ advice.
It should make things easier for condo owners to sell, and for some buyers to get financing.