A temporary change in the requirements for condominium lending will make it easier to finance such properties using government-insured loans.
Temporary new guidelines have been published by the Federal Housing Administration that streamline
the condominium recertification process.
Existing guidelines require FHA-approved condominium projects to be recertified after two years to ensure compliance with FHA requirements.
But with the changes, recertification will only require that applicants to submit documents reflecting any substantive changes since the project’s prior approval.
The details were spelled out Friday in
Mortgagee Letter 2015-27 from the Department of Housing and Urban Development.
In addition, the guidance expands
the eligibility of acceptable owner-occupied units to include second homes that are not investor-owned.
Units are not considered to be owner-occupied if they are occupied by a tenant, vacant and listed for rent, vacant and listed for sale (on existing projects), or under contract to someone who doesn’t intend to occupy the property as their principal or secondary residence.
FHA’s minimum owner-occupancy level is 50 percent.
The owner-occupancy change will help more projects meet FHA’s required owner-occupancy percentage.
HUD additionally noted that the revisions expand
eligible condominium project insurance coverages.
While homeowners associations are required to maintain adequate master or blanket property insurance in the amount
of the condominiums’ replacement costs — this coverage can now include pooled policies for affiliated projects, state-run plans, or coinsurance obligations on the part of the policy holder.
The new provisions are temporary and expire in one year. They are intended to revise FHA’s condominium approval process until the agency can implement a more comprehensive condominium rule change.
