FHA Urged to Ease Restrictions on Condo Financing
Lawmakers, Housing Groups Request Changes
Bipartisan lawmakers, joined by housing groups, are urging the Federal Housing Administration to ease some of its restrictions on condo financing.
In addition to a letter signed by 54 members of Congress and directed to Housing and Urban Development Secretary Julian Castro, a bill was introduced in the House of Representatives in mid-October to force the FHA to make significant changes to its condo rules.
Called the "Housing Opportunity Through Modernization Act," H.R. 3700 would streamline certification requirements for condo projects, relax owner-occupancy requirements, and make targeted reforms to various housing programs at HUD and the U.S. Department of Agriculture Rural Housing Service (RHS). The bill also includes provisions affecting Section 8 rental assistance and public housing programs.
"FHA places significant restrictions on the purchase and sale of condominiums, even though they are often the most affordable homeownership option for first-time buyers, small families, urban and older Americans," the letter-writers said.
"Current FHA regulations prevent buyers from purchasing condominiums, harms homeowners who need to sell their condominiums, and limits the ability of condominium projects to attract resident buyers," said Chris Polychron, the chairman of the National Association of Realtors. "These provisions will ease these restrictions, opening affordable home ownership opportunities for many American families," he wrote in a letter thanking Rep. Blaine Luetkemeyer for introducing the bill. The Missouri lawmaker chairs the House Financial Services subcommittee on housing.
The NAR has been pushing FHA on many of the proposed changes for more than three years, according to staffers.
Syndicated columnist Kenneth R. Harney reported FHA-insured mortgages sometimes financed 80,000 to 90,000 condo purchases annually during the past 15 years, but noted those numbers have plummeted. Only 22,800 such loans were financed during 2014, and through August this year, condos have accounted for just 2.8 percent of FHA loan volume.
Along with NAR, the National Association of Home Builders, and advocates for public housing programs and assisted living programs have voiced support for the reforms.
Kevin Kelly, president of the National Association of Home Builders, testified that reducing the restrictions in FHA condo financing will assist first-time buyers and condo owners who want to move up to a single-family detached home. "Condominiums are critical to the natural progression of homeownership and provide affordable solutions," Kelly said in a written statement.
The Mortgage Bankers Association has not yet taken an official stance. "MBA has been in favor of a review of FHA condo rules, as many of the current rules were enacted during the crisis. We are still reviewing the specific provisions within this legislation, but the environment has changed and the rules should change accordingly," said Steve O'Connor, MBA's senior vice president of Public Policy and Industry Relations.
(Editor's note: At press time, a vote had not been scheduled.)