Congressional leaders are expressing serious reservations about the Federal Housing Administration’s (FHA) mortgage-approval policies for condominiums-policies that are the source of mounting confusion and angst for condominium boards, homeowners and real estate agents nationwide.
The Community Associations Institute (CAI) says these policies are preventing many potential buyers from obtaining FHA-backed loans to purchase homes in those communities, putting entire condominium associations at risk and further worsening the already dismal residential real estate market. This condition is exacerbated in the South Florida area, where the building boom of the 1990s and early 2000s has taken a major toll on the housing market.
While acknowledging the need for thoughtful and financially sound lending criteria, the 31,000-member organization has expressed public concern about past FHA lending guidance that has created continued “confusion and frustration” in the marketplace. That’s why CAI sought to bring Congressional attention to the issue.
“There seems to be an invisible barrier between FHA and condominium associations,” Sen. Scott Brown (D-Mass.) said in a recent letter to Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development (HUD). FHA falls under HUD’s jurisdiction.
“While both sides have been talking to each other, it doesn’t seem like there has been any movement towards a resolution,” Brown wrote. “I hope you will consider these concerns and work to bring certainty to condominium associations in what is an otherwise uncertain housing market. An obvious first step in this direction is to start the public review and comment period on (the) recently issued guidelines as soon as possible.”
Three members of the House Committee on Financial Services have also weighed in, urging FHA to reconsider mortgage approval policies that “ . . . deny mortgages to condominiums associations with special assessments or that have obtained loans to do necessary improvements.” Signed by Massachusetts Reps. Barney Frank, Michael Capuano and Stephen Lynch, the letter also asks FHA to reconsider the mortgage-approval requirement that no more than 15 percent of condominium units can be more than 30 days past due on their association assessments.
The House members also weighed in on FHA’s public review and comment procedures, saying, “Additional opportunities for public input before policy changes are implemented would greatly improve the process.”
With lenders Fannie Mae and Freddie Mac recoiling from unprecedented mortgage-related losses, FHA has assumed a far greater role in the home-sales market, now standing behind at least 30 percent of new home mortgages. That makes FHA lending criteria especially critical, not only for individual homeowners and buyers, but also for a sustained recovery in the housing market.
CAI and other organizations have worked hard to get Congressional leaders to address FHA’s mortgage approval guidelines and what CAI calls the agency’s “insular approach to policy development.”
“The letters sent by Congressional leaders are tremendously helpful, but the issues they address are still on the table,” said CAI Chief Executive Officer Tom Skiba, CAE. “And they are still adversely affecting thousands of condominium communities, millions of current and potential homeowners, and the U.S. housing market as a whole. We will continue to urge FHA to take a new, more transparent and thoughtful approach to its decision-making.”
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