WEST PALM BEACH, Fla. – Dec. 9, 2009 – New guidelines from the Federal Housing Administration could increase sales in a stalled condo market, making it easier, at least temporarily, to get FHA-backed mortgages.
The guidelines, which went into effect Monday, were written to address current market conditions and the glut of empty condominiums following the real estate bust.
Several of the policies, however, expire in December 2010, leaving some real estate experts to call the changes a mixed bag that will ultimately restrict sales.
Others contend the modifications are overall good for a market suffering from a lack of condominium financing.
Changes include reducing the number of units in a new condominium that must be owner-occupied, allowing condo boards to refuse buyers as long as it doesn’t violate the Fair Housing Act, and cutting the expensive requirement of having an attorney certify condominium documents before a sale.
Most banks have shied from condo lending because the units are considered high risk. Those that still lend often want 20 to 30 percent down, a requirement that can eliminate the average buyer.
FHA-backed loans allow for smaller downpayments, but few condos are qualified for that kind of lending.
“Today, a new condo can be more affordable than paying rent, but people can’t buy because they don’t have the downpayment,” said Sarah Mazor, broker at Mazor Realty in Boca Raton, which specializes in new condo sales. “It slows down the market and the people who suffer are the middle class.”
Two big barriers to FHA financing have been a requirement that 51 percent of a condominium be owner-occupied, and a rule banning loans to buildings with “right of first refusal.”
The new temporary guidelines allow for 50 percent of units to be owner-occupied and doesn’t count units that are bank-owned, rented out, or vacant.
Allowing condos with “right of first refusal” access to financing is a permanent change.
Vicki White-Sklark, a government loan specialist with Sun Trust Mortgage in Sunrise, said she’s concerned about how new guidelines that tighten the approval process will ultimately restrict the market.
One change is that no more than 15 percent of total units can be more than 30 days behind on condo association fees.
Also, while other states are now allowed to independently approve FHA mortgages, Florida is still required to have projects submit applications to the U.S. Department of Housing and Urban Development.
“Right now, it’s a moving target,” White-Sklark said, about the guidelines. “I fully expect this to evolve over the next year as they realize the impact it’s going to have on the market.”
Copyright © 2009 The Palm Beach Post, Fla., Kimberly Miller. Distributed by McClatchy-Tribune Information Services.
