HUD Loosening Requirements on Condominiums

Starting Oct. 1, Federal Housing Administration direct endorsement lenders can determine whether a condominium project meets HUD eligibility requirements and begin financing unit sales. Currently, HUD field staff must approve condominium projects, which can be a slow process. The National Association of Realtors likes the new streamlined approach. However, the Department of Housing and Urban Development still requires a 50% occupancy rate to be eligible and no more than 30% of the units can be financed through FHA-insured loans, according to mortgagee letter 2009-19. NAR is urging HUD to relax the occupancy and concentration ratios to encourage more condo sales. "Increasing the concentration limit, or temporarily suspending it, will result in a greater number of owner-occupied units because more borrowers will be able to use FHA in more condominium projects," NAR says in a July 31 letter to HUD. FHA's new condominium policy ends "spot-loan" approvals (starting Oct. 1), which allow lenders to make a loan on one unit in a condo that is not FHA approved. The new streamlined and "uncomplicated" approval process eliminates the need for spot loans, HUD said.