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Articles Posted in FHA loans for condominiums

The first major national condominium safety reform after the horrific tragedy of the collapse of the Champlain Towers South in Surfside, Fla., was announced in October when federal mortgage lender Fannie Mae said it will no longer back loans on units in residential buildings showing signs of structural deficiencies and deferred maintenance.

The federal mortgage underwriter’s new Temporary Requirements for Condo and Co-Op Projects are aimed at addressing the structural and financial health of buildings. The requirements mandate an in-depth review of safety, soundness and structural integrity conditions to determine a condominium tower’s eligibility. The end result will likely eliminate many thousands of condominium communities across the country from this vital source of financing for buyers.

Starting on January 1, 2022, Fannie Mae will no longer back and accept loans for condominium units in properties with significant deferred maintenance or which have been directed by a regulatory authority or inspection agency to make repairs due to unsafe conditions. fmae-300x212Units in such buildings will remain ineligible for purchase by Fannie Mae until the required repairs have been made and documented.

The conditions and deficiencies that meet the criteria for disqualification include full or partial evacuations, damage or deferred maintenance that affects structural integrity, and the need for substantial repairs for one or more of a building’s structural or mechanical elements including the foundation, roof, load bearing structures, electrical system, HVAC, plumbing, and others. Also, properties that have failed to pass local regulatory inspections or recertifications will not be eligible.

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A new rule by the Federal Housing Administration that went into effect Oct. 15th is making it easier for first-time condo buyers, even those with less than perfect credit scores, to get approved for FHA-backed mortgages.

The new rule allows individual condominium units to be eligible for FHA mortgage insurance even if the condominium development has not been FHA approved.  It introduces a single-unit approval process, which will make it much easier for many condominium residences throughout the country to become eligible for FHA-insured financing.

The rule changes also extend the recertification requirement for approved condominium communities from two to three years, and it allows more mixed-use projects to be eligible for FHA-insured mortgages. fha Condo developments will be eligible for FHA financing if their commercial/non-residential space does not exceed 35 percent of the total floor area (previously the maximum was 25 percent).

The FHA provides mortgage insurance on loans made by FHA-approved lenders, which benefit from the added protection against the risk of default.  According to the U.S. Department of Housing and Urban Development, the rule change is expected to make 20,000 to 60,000 condo units per year eligible for the FHA-insured financing.

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