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56 House members protest FHA condo finance rules

WASHINGTON – Oct. 29, 2015 – A band of 56 representatives from both sides of the aisle sent a letter to HUD Secretary Julian Castro to protest “significant restrictions” that the Federal Housing Administration (FHA) has imposed on condo financing.
Due to onerous new “recertification” procedures that require entire condo developments to pass prescribed standards, only 20 percent of previously eligible developments can now use FHA financing. According to congressional estimates, the reduced number represents barely 10 percent of the total market for condominiums.
During the past decade and a half, low-down-payment FHA-backed mortgages financed 80,000 to 90,000 purchases a year. However, the numbers have plummeted since 2011, totaling just 22,800 loans in 2014.
The FHA also imposed a variety of other requirements, such as a limit on a single development’s number of rental units; a cap on the amount of commercial space within a condo complex; and a rule that restricts the fees a condo association can charge owners.
FHA says that losses on fraudulent mortgages originated in Florida during and immediately after the housing crisis in 2009-2010 prompted the regulatory clampdown. However, FHA’s data shows that insured condos today perform 22 percent better (fewer defaults and losses) than single-family homes in its portfolio, according to former FHA official Brian Chappelle.
Source: Washington Post (10/28/15) Harney, Kenneth R.
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Source: Florida Realtors Feed

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