After several false starts, the Federal Housing Administration has finally issued new condominium lending policies that go into effect Dec. 7.
But the agency is making several temporary exceptions to the new rules because of the "volatility" in the condo market.
The new FHA lending policies spelled out in a Nov. 6 letter to lenders limit the number of condo units in one complex that can be financed with FHA-insured loans to 30%. And 50% of the units must be owner-occupied before FHA financing can be used. However, a separate lender letter the same day allows exceptions to the FHA concentration and owner-occupancy requirements until Dec. 31 of next year.
One exception allows FHA lenders to ignore foreclosed units in calculating the owner-occupancy rate until the end of next year.
Meanwhile, the Department of Housing and Urban Development will allow FHA lenders to use a "Spot Loan Approval Process" for condominium units until Feb. 1. Spot approvals allow FHA lenders to finance one condominium unit in a building that has not been approved by HUD.
The new condo lending policies give FHA direct endorsement lenders the authority to approve condo projects for the first time. The streamlined lender-approval process eliminates the "need" for spot approvals, HUD said.