WASHINGTON – The National Association of Realtors is calling on the Department of Housing and Urban Development to speed up implementation of reforms to the Federal Housing Administration's condominium reforms.
Legislation signed by President Obama in July that makes numerous reforms to government housing programs included provisions that reduce restrictions on condominium buildings being FHA approved so that more FHA borrowers can purchase condominium units.
The Realtors are hoping HUD will issue an interim proposed rule soon that will allow some of the condo provisions to go into effect right away. But some in the housing industry worry a slow rulemaking process could delay implementation to after the November elections and the transition to a new administration. The Realtors estimate that less than 10% of condominiums currently qualify for FHA mortgage insurance.
"Realtors and homebuyers alike have been waiting for relief on FHA's condo regulations for years, and we're nearly at the finish line on owner-occupancy ratios, recertification, and other important issues," said Tom Salomone, president of the Realtors, in a recent statement.
"NAR is encouraging leaders at HUD to move quickly and in the spirit of the law as they implement the provisions of H.R. 3700, and we're hopeful that we'll see action on this soon."
Under the bill, Congress lowered the FHA's requirement for owner-occupied condominium units in a development to 35% from 50%. The new law also directs FHA to streamline its condominium recertification process and allow more commercial space in FHA-approved condominium buildings.
Part of the housing industry's concern is that the new law was enacted as HUD was already working on a comprehensive update to its condominium rules for several years. The department had finally sent a proposed rule to the Office of Management and Budget in early May, where it has languished ever since.
It is unclear how easily that earlier reform effort can incorporate the new legislation.
With the process of reforming the condominium provisions slowed down, HUD recently issued a temporary extension of its condo approval policy for another year, which has been the department's standard practice since 2011.
But this time, the extension notice signaled that HUD will be issuing guidance on the recently passed legislation designed to streamline the FHA's condominium loan program.
"FHA will provide program participants with additional guidance concerning these affected provisions in conformity with the new law," the agency said in an Aug. 24 letter to FHA lenders.
Yet it appears HUD is an awkward position because its original condo proposed rule is still at OMB.
"We had heard they were going to pull that proposal back from OMB and then add provisions from the legislation," said an official for the Realtors who spoke on the condition of anonymity. But HUD's condo proposal was still at OMB as of Wednesday.
The new law also allows condominium associations to charge transfer fees where the seller of a unit pays a fee that goes toward maintenance and upkeep of the property.