Owner Occupancy Standards
The U.S. Department of Housing and Urban Development released a mortgagee letter setting out requirements for when a buyer of a condominium unit can get FHA-insured financing in a development that has an owner-occupancy ratio as low as 35 percent. The letter stipulates that the development must show it has “higher reserves, a low percentage of association dues in arrears, and evidence of long-term financial stability” for the lower standard to be achieved.
The 35 percent ratio was enacted into law this summer in NAR-backed legislation called “The Housing Opportunity Through Modernization Act,” H.R. 3700. The law says the 35 percent ratio would become law automatically unless HUD released a different figure by Oct 28. In its release, one day before that deadline, HUD says it will approve the 35 percent ratio, as long as the stricter conditions are met to ensure loans can be made without putting the FHA insurance fund at undue risk. “HUD believes that it would be possible to protect the fund while allowing a lower owner-occupancy percentage if certain adjustments are made to enhance other requirements that affect the financial stability of the project,” the agency said.
NAR President Tom Salomone said in a statement that the letter is a step in the right direction, but the lower ratio should be available to all FHA-approved developments. “NAR has been fighting for changes to FHA’s condominium rules for years, and the guideline announced will bring some much-needed relief to the market,” Salomone said — “This is a big win for NAR, and while we believe all condominiums should have the rules applied to them equally, we believe FHA has heard the concerns of Realtors® and is moving in the right direction.”
Source: REALTOR® Magazine Online