Condo Media - August 2011 - 14

N e w s C A I

FHA Condo Rules to Change (Again)
Guidelines Will Expand on Current 21-page Guidance
he Federal Housing Administration (FHA) told industry stakeholders to expect a detailed update to existing condominium underwriting regulations, which would be released by the end of June 2011. According to the FHA, the new guidance would provide greater detail, clarity and more flexibility for condominium associations to qualify for FHA financing. Since FHA began the process of revising condominium underwriting criteria more than two years ago, CAI has been critical of both the criteria adopted by FHA and the process used to develop new guidance. At Condo Media press time, the guidelines had not yet been released, but if FHA representations on the forthcoming guidance were accurate, the evolved requirements would show movement toward policy recommendations made by CAI and our industry allies.

Update:
On June 30, Condo Media received word that FHA had just released the new guidelines. CAI will provide analysis of the new guidelines on their website at www.caimortgagematters.org

in support of enhancements to the rules and limits relating to: 1. 2. 3. 4. 5. 6. Owner-occupancy FHA concentration Investor ownership Pre-sale Delinquent HOA assessments Commercial space

In response to our concerns, FHA noted that it would be releasing new guidelines for the FHA mortgage insurance program, which will greatly expand on the current 21page guidance.

Meeting with FHA
On June 13, a CAI delegation led by CAI President Steven Brumfield met with Bob Ryan, acting commissioner of FHA. The purpose of the meeting was to discuss issues raised by CAI and our industry allies, including the Institute of Real Estate Management (IREM), the National Association of Home Builders (NAHB) and the National Association of Realtors (NAR), that were communicated to FHA via letter dated May 6, 2011,

New Guidelines and Regulations
FHA indicated that the new guidance would be comprehensive and written in easy-to-understand language, as well as provide greater flexibility in allowing community associations to qualify for FHA financing even if they do not meet all of the current requirements, although it did not provide further details. FHA has also indicated that the guidance would be followed by a more formal process of establishing more permanent regulations governing the condominium program. This is an important move by FHA as developing formal regulations requires

FHA to seek input from stakeholders like CAI, something it has not done in developing the current or soon-tobe-released guidance. Since 2009, CAI has called for greater transparency and more public input in the development of new FHA underwriting rules. Since the housing crisis, FHA has become an important source of financing for many condominium buyers. In 2010, FHA-insured mortgages accounted for more than onethird of all condominium purchases. Many potential buyers seek out FHA-approved properties as a sign of sound governance in a troubled market. Many other lenders are also informally adopting FHA standards as a benchmark for condominium lending, so the impact of FHA requirements will continue to expand. CAI will post an analysis of the new regulations to its Mortgage Matters website at www.caimortgagematters.org shortly after they are released. CAI will continue to monitor and participate in shaping the development of the FHA’s condominium underwriting guidelines to ensure that the perspective of community associations is heard. If you have any questions about the FHA’s underwriting criteria and how it could affect your community, e-mail government@caionline.org with “FHA Mortgage Insurance Requirements” in the subject line. CM

CONDO MEDIA • AUGUST 2011

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Condo Media - August 2011

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