In the current real estate market, condo sellers need all the buyers that they can find. With mortgage lending requirements still incredibly tight, the pool of available buyers is much smaller than it was just a few years ago. Now, new rules for FHA loans targeted specifically at condos will further limit the options for condo buyers.
According to National Mortgage Professional Magazine, “Tens of thousands of condominium unit owners across the country may not know it, but their ability to sell or refinance could be jeopardized by a rolling series of federal government deadlines.”
On December 8, as many as 25,000 condo projects across the country missed the deadline for FHA recertification and approval which is required for FHA loan approval through normal processes. According to the magazine, “What this means, lenders and condo experts say, is that unsuspecting unit owners nationwide could suddenly be cut off from an increasingly important source of mortgage money. In some markets where FHA-insured mortgages are used for 75 percent or more of first-time home purchases, condo sellers could be severely handicapped.”
The only silver lining is that the FHA has liberally granted last minute extensions for many projects into next year. According to the story, “the eligibility issue dates from November 2009, when the FHA published new rules on the types of condo projects acceptable for mortgages on unit sales and refinancings. The rules were the outgrowth of a review that found that the FHA – which is essentially a government-owned insurance company – had approved thousands of projects over the previous two decades but possessed inadequate information on their underlying homeowners associations’ budgets, legal documents, insurance coverage, renter-to-owner ratios, delinquencies on condo-fee payments, the amount of commercial space, and a variety of other characteristics that could affect a project’s financial stability.”
According to the HUD condo approval tool (here), the following downtown Austin condo projects have received approval so far: