WASHINGTON–In a rare display of bipartisanship, the Senate has voted in favor legislation that would have the Federal Housing Administration (FHA) lighten up on its condo financing regulations and make low down payment FHA loans more available to the people they are supposed to serve — moderate-income buyers, many of them minorities and first-time purchasers, who turn to condominiums as their most affordable option.
The vote in the Senate followed a 427-0 vote in the House earlier this session.
The legislation follows years of criticism from housing, community association and other groups that the FHA’s rules are overly strict requirements, which has led to a sharp decrease in its role in financing condos.
“The agency’s restrictions on condo community eligibility for financing became so onerous — requiring complicated re-certifications of entire developments every two years — that thousands of condo associations abandoned the program,” TheRealDeal.com reported.
HR 3700 aims to address a number of issues, including:
- Ordering the FHA to streamline the entire re-certification process for condo associations and make compliance “substantially less burdensome.”
- Reducing the minimum owner-occupancy ratio from the current 50% to 35%, unless FHA can provide justification for a higher percentage.
- Allowing transfer fees. The legislation directs the FHA to stop rejecting condo communities because they collect small transfer fees when units are sold. The funds collected are used to support association activities — they benefit all residents. FHA will now have to follow the lead of Fannie Mae and Freddie Mac, both of whom consider community-benefit transfer fees acceptable.
- Providing more flexibility on the amount of commercial space permitted in condo developments. Some urban condos are designed for mixed-use — residential and commercial combined — because that’s what makes economic sense in their locations.