A change in FHA policy has caused major problems for condo sellers, buyers, and home owner association boards across the country by making many condos illegible for FHA loans.
This little-publicized change in policy has led to decreased prices and the blockage of refinancing, according to an article in The Real Deal. Condo industry leaders, Realtors, and owners are upset by the series of rule revisions that have caused thousands of condo projects to be ineligible for FHA mortgages.
Many who hoped to refinance or buy a condo are being forced to obtain conventional bank loans with much higher interest rates.
According to the FHA, of the 25,000 condo projects whose certification for FHA eligibility expired between last December and the end of September, only 8.4% have been approved or re-certified.
Some condo boards have faced rejection on simple technicalities in their applications for re-certification. Board members are also facing legal problems due to these new FHA rules. They must sign certification documents that recognize compliance with all local statutes and that they have no knowledge of anything that could lead to a condo owner becoming delinquent. If they are incorrect in this mandatory certification, they can face up to $1 million in fines and 30 years in jail.
The major takeaway from this for unit owners, buyers, and sellers is that if an FHA loan is a part of your plan, check with a mortgage professional and the condo board to make sure the condo project is certified.
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