The Federal Housing Administration is trying to be more hospitable with condominiums by proposing a new workaround on their previous demand that condominium associations amend their current covenant, conditions and restrictions which allows mortgage lenders and investors to lease properties–acquired through foreclosure–for a period of less than 30 days.
Lawyers at the Department of Housing and Urban Development stated that this was in direction violation of the 1994 National Housing Act’s amendment. This provision was added to condominiums’ CC&Rs in the 1980’s and 90’s by Freddie Mac and Fannie Mae, as well as other lenders and investors in order to make management of real estate owned properties more flexible.
Without warning, however, the FHA began to rejecting applications because the underlying CC&Rs allowed mortgagees temporary leases on repossessed foreclosure units, according to an article published in Inman.com.
This sudden change in policy threatened the certification and recertification of many condo projects, meaning the affected units would no longer be eligible for FHA loans. Owners might also find selling their homes a lot more complicated, potentially affecting property values.
The article’s author, Ken Harney, states:
“More recently, the agency’s approval of a condo project for financing has also been the only way for older unit owners to obtain a reverse mortgage to help with personal expenses.”
The problem with FHA financing is that it is necessary, it has been proven to be necessary, and, at least for a little while, FHA financing was threatened by the FHA themselves. Most importantly, by their non-compliance to provisions in CC&Rs that they have had no problem with before.
In addtion, the FHA does not approve loans on individual condos. In fact, the entire project must be in compliance with certification in order for any one unit to be able to apply and qualify for an FHA-insured mortgage.
Without FHA certification, older Americans looking to supplement their retirement with a reverse mortgage might find their hopes dashed in the near future.
Reverse mortgages done by private lenders are non-existent, and have proven to be unreliable in the past, making FHA-insured reverse mortgages, not only safer, but also one of the few options available for retirees who would want a reverse mortgage.
In order to fix what was broken, new policies ask that either condo boards amend their CC&Rs or provide written document that no units will be rented for less than 30 days or provide services associated with a hotel.
The consequences of their actions, however, are yet to be seen.
Interested in a reverse mortgage or simply want more information? Give PS Financial Services a call at (888) 845-6630 or email us at info@PSReverseMortgage.com. We work with you to provide the best service regardless of your housing unit. We do not pressure those who inquire, we are simply here to help.