Magazine article American Banker

Agents Object to New FHA Condo-Occupancy Rule

Magazine article American Banker

Agents Object to New FHA Condo-Occupancy Rule

Article excerpt

Byline: Brian Collins

WASHINGTON -- When the Federal Housing Administration recently announced a reduction in its 50% owner-occupancy requirement for FHA-approved condominium developments, the National Association of Realtors called it a "big win."

The reduction, announced and effective on Oct. 26, allows condominium buildings with a minimum of 35% owner-occupants to become FHA-approved so the owners could qualify for FHA-insured mortgages.

But on further study NAR officials realized that FHA included reporting requirements they didn't expect. And it would be difficult for many condominium associations to meet those requirements. So the occupancy requirement would likely remain at 50% in many cases.

"There was always a chance that the 50% owner-occupancy requirement would stay in place, so we were pleased to see FHA finally take a big step in the right direction," NAR President Bill Brown said by email on Thursday. "That said, the requirements for a building to qualify for that 35% threshold are strict, and we'll be making the case that the 35% threshold should apply equally to all buildings otherwise eligible for FHA approval."

FHA has also proposed a rule that would give the agency the flexibility to reset the owner-occupancy requirement at anywhere from 25% to 75% so it can be responsive to future market changes. The comment period on this proposal ends Nov. 28.

NAR will file a comment letter and seek rule changes so more condominiums can quality for the 35% owner-occupancy requirement. …

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