Realtors to condo boards: Get FHA certification
WASHINGTON – May 27, 2014 – Many prospective condominium buyers find that they cannot use FHA financing – not because they personally do not qualify, but because the entire development where they want to buy is ineligible.
Due to policy changes at the federal level and decisions by condo boards, FHA lending has become off-limits to thousands of communities in the last few years.
Agency officials have banned "spot" loans and will insure mortgages only for units in condo projects that have passed a certification process. That process looks at elements such as budgets, reserves, percentage of renters, insurance coverage and delinquencies on condo-fee payments.
FHA contends that its revised procedures weed out fiscally weak, poorly managed projects. However, some condo boards argue that FHA's evaluation criteria are too strict, and that the certification process is bureaucratic and cost-prohibitive.
Since changing its policy four years ago, the number of condo developments approved for FHA financing has plummeted by over 50 percent. As of mid-May, FHA says just 10,020 communities out of roughly 144,000 condo projects nationwide had FHA certification – about 7 percent.
The country's real estate community is rallying to persuade condo boards to seek the certification. An educational video that debuted at the recent National Association of Realtors spring legislative conference, for instance, emphasizes the "positive benefits" of certification. It urges directors to keep unit values high by expanding the pool of potential buyers, help unit owners tap equity for retirement, and remember the low risk of default associated with FHA borrowers.
Source: Washington Post (05/24/14) P. 5; Harney, Kenneth R.© Copyright 2014 INFORMATION, INC. Bethesda, MD (301) 215-4688