Friday, November 13, 2015

Good News for for Condo buyers

This is what I can call good news!

I have hardly made a single sale that wasn't hard cash since 2007. 
My business is in large part about condos of all kinds and values. 
But a fact that is not usually known by the public is that getting financing for an average condo is more complicated than for a single family home.
A typical middle class FHA financed condo in Dade or Broward County should be limited to an approximate $250,000 to $270,000 value. Fannie Mae and Freddie Mac allow higher limits. 

However FHA has established very strict rules to govern its loans to condominium type properties. Among the requirements: a high percentage of owner-occupied units and a low percentage of investor-owned units; strict insurance requisites; rigorous re-certification steps to be taken periodically by the building associations; reserves requirements, etc. 

It often proved to be an overwhelming task to many condominium associations which simply found it too bothersome or costly. 

In reality, condominium management was never at the root of the big real estate crisis and the mortgage catastrophe was mainly the result of bankers, lenders and "financiers" greed and ruthlessness. But condominiums suffered much of its consequences; The eyes and vigilance of HUD and FHA were (as an example) transfixed on the fact that many of these condominiums did not have sufficient reserves to confront an unusual amount of failures. This was true but it was also true that reserves are not built up to tackle recessions and debacles of this magnitude, especially when they are caused by external macro-economics out of condo associations control.

This official policy has been a drawback on home affordability. 
I am a realtor and I daily observe it in my job.  

The bureaucratic fury against the least important factor in mortgage loans risk assessment had been -ironically- killing much of  Federal government's incentives to revive the "American Dream of Home Ownership".  

The following, let's hope, could be the beginning of a step in the right direction.

HUD eases FHA condo financing rules

Federal Housing Administration (FHA) Principal Deputy Assistant Secretary Ed Golding announced changes to FHA condominium policies last night at the National Association of Realtors® (NAR) convention in San Diego.
Effective immediately, FHA will streamline the condominium re-certification process and expand its definition of acceptable "owner-occupied" units to include second homes not owned by investors. The provisions expire in one year "until the agency can implement a more comprehensive condominium rule change."
The change should qualify more condo complexes for FHA loans. That, in turn, will give more buyers access to FHA low-down payment mortgages.
The new rule:

  •  Modifies the requirements for condominium project re-certification,
  • Revises the calculation of FHA's required owner-occupancy percentage,
  • Expands eligible condominium project insurance coverages 

Florida homebuyers, perhaps more than any other state, will benefit from FHA's new rule.
"This is going to be an amazing stimulus to the housing market for the first-time homeowner and entry-level housing buyer," says Frank Kowalski, president of Florida Realtors in 2005 and an insurance agent. "It's a catalyst for change and long overdue. 

Thousands of contracts could not use FHA financing, and buyers were forced to come up with 25 – even 30 percent down payments."

Kowalski says FHA's rule change should help more than just first-time buyers, however. Condo financing problems also frustrated the move-up market – condo owners who want to make the move to single-family housing.

"It's difficult to sell an existing unit if you can't find a qualified buyer," Kowalski says. "A lot of people are frozen in place: Those in (a condo unit) can't get out; those out can't get in."
According to Golding, the just-announced FHA changes are in line with ones requested by NAR, which has been an advocate for reform. NAR cited problems with a lengthy and complex recertification process, burdensome owner-occupancy requirements, and the limits on acceptable property insurance.

One major benefit for Florida condo owners: the property insurance rule change. FHA will now accept Citizens Property Insurance coverage – the Florida-owned company and largest condo insurer in the state. In addition, FHA changed the way it will view co-insurance clauses, which exist with most Florida condos.

That change alone will help up to 85 percent of Florida's condo associations, according  to Danielle Blake, the Miami Association of Realtors' government affairs director and a long-time advocate for FHA change.

According to Golding, insurance and recertification changes will take place immediately. Policy changes related to owner occupancy, commercial space percentage, FHA concentration and spot approvals would be addressed through formal rulemaking in the near future.

"Condos are often the most affordable option for homebuyers, especially first-time buyers, and making sure FHA financing is an option is important to supporting homeownership," says 2015 NAR President Chris Polychron.

This information was read in  on Nov. 13, 2015



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