Today, the controversial Federal Housing Administration (FHA) condominium mortgage rules go into effect. I’ve written about them extensively on this blog here. The new FHA rules, in summary, require that condominiums undergo a much more rigorous financial review prior to being accepted into FHA mortgage programs. Sort of like a cardiac stress test for condominiums.
I was interviewed this morning by Associated Press real estate reporter Alan Zibel about the impact of the changes. I said that despite the short term hurt on lenders and the extensive underwriting required, I believe they are a good thing for consumers and condominium buyers because they require condominiums to get their financial collective acts together. Mr. Zibel graciously quoted me in the article:
While the rules could be tough for builders, they will protect consumers because lenders will be forced to be more careful about which projects they fund, said Richard Vetstein, a real estate lawyer in Framingham, Mass. “On the whole, it’s a good thing,” he said. “Financially sound condominiums make better investments.”
Here’s a direct link to the AP story as reprinted in the Los Angeles Times.
The AP article also touched on the difficulty new condominium developers face with the tougher rules. A Utah condo developer, who shelved a 300 unit project in favor of free standing homes, characterized the new rules as a “debacle.” But the FHA already watered down the new rules from those previously proposed, so builders could be dealing with far worse. On the whole, I think the rules are fair, balanced, and unfortunately necessary in light of the condominium meltdown in states such as Florida and California.
Today’s hurt is tomorrow’s gain….
