Earlier this year, we remarked on signs of change to the FHA’s tangled financing program (check out the previous blog, here). For years, complaints focused on how the agency’s restriction on certification – requiring recertification of developments every two years – tied up all opportunities in red tape for the buyers who needed it most (mainly first time buyers, and retired homeowners refinancing mortgages). Recently the Senate took a major step in the right direction by unanimously passing legislation that will require the FHA to ease up on regulations and make low down payment FHA loans more available to buyers who could leverage the FHA’s leniency on credit scores and debt-to-income ratios to get into the housing market.
The following are some of the changes that have been introduced:
• The FHA will be required to update the recertification process for condo associations and make compliance less of a headache.
• The minimum owner-occupancy ratio is to be reduced from 50 percent to 35 percent unless the FHA can provide justification. Both of these moves should be incentives for condo associations to rejoin the program and open up the condo market to buyers.
• The FHA will be required to allow transfer fees – the fees that some condo associations collect to benefit the community.
• The FHA will be directed to change their approach to admitting mixed used residential/commercial blocks, providing more leniency for extra commercial space if necessary.
Although the FHA’s financing program faces the obstacle of enticing back the thousands of condo associations that have left the program, if the changes are implemented smoothly and swiftly, substantial numbers of condos could be once again available to the buyers who could really use the FHA’s support to get on the property ladder.
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