IMPORTANT UPDATE: 11/16/09: FHA Issues Final Revised Condominium Lending Guidelines
As a follow up to my post on the new FHA condominium regulations, I received word from my friend Seth Wills at XLT Property Management, that the Community Associations Institute — the leading condominium and homeowner’s association trade group — recently sent a bulletin to its members, railing against the new FHA and Fannie Mae regulations as overly onerous and hurtful to the real estate market. CAI’s memo states:
CAI believes the new regulations would be a serious burden for condominium associations, and lead to market confusion that could hinder the housing and economic recovery. Under the proposed regulations, all condominiums previously approved for FHA financing would have to be reapproved or FHA financing would not be available. Also, instead of FHA staff reviewing and underwriting condominium projects, FHA would follow Fannie Mae and Freddie Mac by allowing lenders to review and underwrite these projects and certify compliance to FHA. This is the same system that resulted in the current mortgage default crisis. Furthermore, condominium boards (and management) would be asked to provide legal documents, contracts, plans, insurance coverage, pre-sale and owner occupancy percentages and other documentation to lenders performing the underwriting reviews. Condominium associations would also be required to compile, maintain and provide the necessary documentation and information requiring them to develop and implement new procedures — adding significantly to the workload of community managers and condominium boards.
CAI’s position is not surprising given the spat of recent, increased government intervention and regulation affecting condominium and HOA governance. CAI makes a good point with respect to the agencies’ failure to coordinate their regulatory policies:
CAI believes it is essential that these agencies coordinate their actions. These agencies are all essential to mortgage financing and the housing market. Different requirements create confusion for lenders, borrowers, associations and the general public. Such confusion can only slow the recovery of the housing market and the economy in general.
The FHA regulations are set to go into effect November 2. We’ll see if CAI’s promised lobbying push this next month has any effect.