The House approved a bill 427-0 that would revamp the Federal Housing Administration's condominium loan program and expedite the approval process for Rural Housing Service guaranteed loans.
The bill would streamline the FHA's certification requirements for condo projects, allow more commercial space in FHA-approved condo buildings and relax current owner-occupancy requirements.
It also would authorize the Agriculture Department to use direct endorsement lenders to approve RHS-guaranteed single-family loans. The FHA and Department of Veterans Affairs have used the direct endorsement process for many years.
If the Senate passes a similar bill, it would likely take RHS a couple of years to issue the regulations for its direct endorsement program and complete the application process to approve its direct endorsement lenders.
Currently, RHS lenders have to send loan applications and closing documents to the Agriculture Department in Washington for loan approval.
The bipartisan bill, sponsored by Reps. Blaine Luetkemeyer, R-Mo., and Emanuel Cleaver, D-Mo., also includes proposed reforms to the Department of Housing and Urban Development's rental assistance and public housing programs.
"This comprehensive, bipartisan legislation represents the first real reforms to the programs and processes at HUD and the Rural Housing Service in decades," said Luetkemeyer, who chairs the House Financial Services Subcommittee on housing.
The National Association of Realtors has been a strong supporter of the bill.
"This legislation will put homeownership in reach for more families, and we applaud Congress's work to take us there," said NAR President Tom Salomone. "We look forward to seeing it advance through the legislative process and to the President's desk, so it can be signed into law."
Condominiums are among the most affordable choice for first-time buyers, urban dwellers and older Americans, according to NAR. However, the group claims that the government's policies make it difficult for condominiums to gain and maintain FHA certification so buyers can use FHA financing to purchase a unit.
At least 50% of the residents of a condominium project must be owners under current HUD rules. The Luetkemeyer bill would lower the owner-occupancy requirement to 35% but leave HUD with some flexibility to raise or lower it further.
The bill would also allow exceptions to FHA restrictions on commercial space in condominium projects. The current limit is 25%.
Despite the bill's backing by the vast majority of House lawmakers, the Obama administration raised concerns that it would allow lenders to approve higher limits of commercial space in condo projects. But the administration stopped short of threatening a veto, saying in a statement Feb. 2 that it "looks forward to working with the Congress on continuing to improve the bill as it moves forward."