Just a month after proposing to relax rules on condominium loans, the Federal Housing Administration has loosened owner-occupancy requirements.
On Sept. 27,
the Department of Housing and Urban Development submitted a proposed rule on requirements for condominium project approvals.
Included in the proposal
was an increase to the minimum owner-occupancy ratio for condominium developments, which currently stands at 50 percent.
The proposal changed the requirement to a range of between 25 percent and 75 percent.
On Wednesday, HUD
issued FHA Mortgagee Letter 2016-15 lowering the owner-occupancy requirement to as low as 35 percent for existing condo developments provided the project meets certain conditions.
“While having too few owner-occupants can detract from the viability of a project, requiring too many can harm its marketability,” HUD said in a news release. “It is FHA’s position that owner-occupants serve to stabilize the financial viability of the projects and are less likely to default on their obligations to homeowner associations than non-owner occupants.”
The change impacts developments more than 12 months old.
Funding of replacement reserves for capital expenditures and deferred maintenance must be documented for three years. The documented account needs to represent at least 20 percent of the condominium development’s budget.
In addition,
no more than 10 percent of the total units can be more than 60 days past due on their condominium association fee payments.
There was no change to the 30 percent owner-occupancy requirement on condominium projects that are proposed, under construction (including existing projects less than 12 months old) or gut-rehab conversions.
FHA was required to issuance owner-occupancy guidance by the
Housing Opportunity through Modernization Act of 2016.
In November 2015, HUD issued Mortgagee Letter 2015-27 temporarily changing the requirements for condominium lending including a streamlined condominium recertification process, expanded eligibility of acceptable owner-occupied units and expanded eligible project insurance coverages. But those changes expire next month.
