1-888-800-1042
Kaman Cusimano Logo

Condo | HOA Lawyers

New Law Makes Changes to FHA Condominium Approval Process

Unless a condominium association is certified by FHA, lenders may not offer borrowers FHA-insured mortgages.  In 2009, FHA implemented a number of changes to the agency’s condominium approval requirements.  As a result, the number of FHA-approved condominium associations has plummeted.  In July 2016, President Obama signed into law H.R. 3700, the “Housing Opportunity through Modernization Act of 2016,” which will allow more condominium associations to become FHA certified.  However, the real test is the pending release of FHA’s updated condominium regulations.

The Housing Opportunity through Modernization Act of 2016 requires FHA to issue new regulations according to the following:

  • Make recertification substantially less burdensome than original certifications.  The FHA must consider lengthening the time between certifications for approved properties and allowing information to be updated rather than resubmitted.
  • Provide additional flexibility for associations with commercial space.  FHA must make decisions regarding exemptions to the current commercial space requirements and must consider factors relating to the economy of the locality in which the property is located.
  • Cease and desist from rejecting condominiums that use transfer fees to fund association operations.
  • Decrease the required percentage of units that must be occupied by the owners as a principal residence or a secondary residence.

Beginning on July 29, 2016, FHA will have 90 days to issue its new regulations.  If FHA fails to issue regulations within this time frame, the owner occupancy requirement will automatically decrease from 50% to 35%.

FHA certification increases the pool of potential buyers for condominium units.  In the current lending environment, more than 50% of new home buyers plan on using FHA loan programs to finance their new home purchase.  With an increased pool of potential buyers, FHA approved associations may see higher competition for units that are for sale, and therefore, an increase in value of all the units in the association.  If an association does not have FHA approval in place, they risk losing a large pool of potential home buyers.

Please contact our office if you would like our assistance in the FHA application process.

Categories

Three bars icon gold

Recent blog Posts

Three bars icon gold

Partner Shannon McCormick appointed to the Northern Ohio CAI Board

We are thrilled to announce that Shannon McCormick, Partner, and Chair of our Cleveland Office, ...
Read More →

Attorney John Izzo presented at CAI Central Ohio Chapter’s Annual Meeting

On January 25, 2024, Attorney John Izzo took the stage as a distinguished panelist at ...
Read More →

Borrow or Assess? A Guide to Community Association Loans

When the time comes for major capital item repair, replacement, or restoration, an association has ...
Read More →

Partner M. Katherine (“Kate”) Bushey elected to CAI’s Business Partners Council

Partner M. Katherine (“Kate”) Bushey has been elected to CAI’s Business Partners Council. The Business ...
Read More →