WASHINGTON—Two politically potent housing organizations have called on the Federal Housing Administration to relax its rule regarding condominiums.
The National Association of Realtors and National Association of Home Builders want the FHA to eliminate the restriction on condo rentals and increase or at least temporarily suspend its limitation on the number of units that can be financed by government-insured loans. They also want relief from a rule that requires a certain number of units must be sold before buyers can qualify for an FHA mortgage.
Under current FHA rules, at least 30% of a condominium community’s total units must be sold before the agency will endorse a mortgage on any unit. But the requirement will become even more onerous when it returns to its previous 50% level on June 30.
In addition, FHA financing is limited to no more than 50% of the condominium’s units, and no less than half the community can be owner-occupied.
Relaxing the rules, the NAR and NAHB said in a letter to acting FHA commissioner Robert Ryan, would allow more first-time buyers to purchase condos, which tend to be aimed at the first-time buyer market. Often, FHA financing is the only financing for which rookie buyers can qualify, they pointed out.
The two groups were joined in the letter by the Community Associations Institute and Institute for Real Estate Management.
On the issue of occupancy requirements, the trade organizations noted that neither Fannie Mae nor Freddie Mac have specific rules aimed at condos, as long as the borrower is going to occupy the unit after purchase.
The groups also want the prohibition against investors owning more than 10% of the development’s units raised “to a more appropriate level,” and to increase that part of a mixed-use property’s floor area that can be used for commercial purposes from 25% to 45%.
