WASHINGTON – In an effort to promote affordable and
sustainable homeownership, especially among credit-worthy first-time buyers,
the Federal Housing Administration (FHA) this week published a long-awaited final
regulation, and policy implementation guidance, which establish a new
condominium approval process.
Designed to be flexible and responsive to market conditions,
FHA’s new condo rule and the new Condominium Project Approval section of the
Single Family Housing Policy Handbook, provide a comprehensive revision to FHA
condominium project approval policy. In particular, the new policy will
allow certain individual condominium units to be eligible for FHA mortgage
insurance even if the condominium project is not FHA approved. The polices
become effective Oct. 15, 2019. Read
FHA’s new condominium approval regulation.
FHA’s new condominium policy is part of a broader
Administration objective to reduce regulatory barriers that currently restrict
affordable homeownership opportunities. FHA’s new rule:
Introduces a new single-unit approval process to make it
easier for individual condominium units to be eligible for FHA-insured
financing;
Extends the recertification requirement for approved
condominium projects from two to three years;
Allows more mixed-use projects to be eligible for FHA
insurance.
“Condominiums have increasingly become a source of
affordable, sustainable homeownership for many families and it’s critical that
FHA be there to help them,” said U.S. Housing and Urban Development Secretary
Ben Carson. “Today, we take an important step to open more doors to homeownership
for younger, first-time American buyers as well as seniors hoping to
age-in-place.”
HUD Acting Deputy Secretary and FHA Commissioner Brian
Montgomery added, “Today we are making certain FHA responds to what the market
is telling us. This new rule allows FHA to meet its core mission to support
eligible borrowers who are ready for homeownership and are most likely to enter
the market with the purchase of a condominium.”
The vast majority (84 percent) of FHA-insured condo buyers
have never owned a home before. While there are more than 150,000 condominium
projects in the U.S., only 6.5 percent are approved to participate in FHA’s
mortgage insurance programs. As a result of FHA’s new policy, it is
estimated that 20,000 to 60,000 condominium units could become eligible for
FHA-insured financing annually.
Single Family Policy Handbook Guidance
FHA’s new Single Family Handbook sections published today
provide the additional requirements that lenders and other industry
participants need in order to implement FHA’s new policy, including
requirements for single-unit approvals, minimum owner occupancy requirements,
and commercial/non-residential space limits. Read
FHA’s changes to its Single Family Handbook.
Single-Unit Approvals
As of Oct. 15, FHA will insure mortgages for selected
condominium units in projects that are not currently approved. An
individual unit may be eligible for Single-Unit Approval under the following
conditions:
The individual condominium unit is located in a completed
project that is not approved;
For condominium projects with 10 or more units, no more than
10 percent of individual condo units can be FHA-insured; and projects with
fewer than 10 units may have no more than two FHA-insured units.
Minimum Owner-Occupancy Requirements
FHA will require that approved condominium projects have a
minimum of 50 percent of the units occupied by owners for most projects.
FHA Insurance Concentration in Condominium Projects
FHA will only insure up to 50 percent of the total number of
units in an approved condominium project.
Commercial/Nonresidential Space Limits
FHA will require that the commercial/non-residential space
within an approved condominium project not exceed 35 percent of the project’s
total floor area.
