The Federal Housing Administration (FHA) recently announced via a press release that it has published a set of temporary guidelines under its condominium approval process that are intended to increase affordable housing options for first-time and low-to-moderate income homebuyers. The new provisions are effective immediately, and will expire in just under one year’s time on November 13, 2016.
According to the FHA, these temporary guidelines will help streamline the administration’s condominium recertification process and expand the eligibility of acceptable “owner-occupied” units to include second homes that are not investor owned. They will remain in effect throughout the year until the FHA implements a more comprehensive condominium rule change, and will take the following actions:
- Modify the requirements for condominium project recertification.
- Revise the calculation of the FHA’s required owner-occupancy percentage.
- Expand eligible condominium project insurance coverages.
In regards to recertification, FHA-approved condominium projects require recertification every two years to ensure that the project is still in compliance with the administration’s eligibility requirements, and to make sure that no conditions exist that would present an unacceptable risk to the FHA. For existing condominium projects seeking recertification, the FHA will now only require applicants to submit documents reflecting any substantive changes since the project’s prior approval.
When it comes to the calculation of the required owner-occupancy percentage (50%), the FHA’s current procedure has now been modified to allow units that are not investor-owned to be considered owner-occupied for the purpose of condominium project approval. As stipulated by the FHA, a condominium is considered to be owner-occupied when it is not: tenant occupied; vacant or listed for rent; existing (previously occupied), vacant, and listed for sale; or under contract to a purchaser who does not intend to occupy the unit as a principal residence or secondary residence.
Lastly, when talking about eligible insurance coverages, the Homeowners’ Associations are required to maintain adequate “master” or “blanket” property insurance in an amount equal to 100% of the current replacement costs of the condominium (exclusive of land, foundation, excavation, and other items normally excluded from coverage). Insurance coverage for condominium project approvals that consist of pooled policies for affiliated projects, state-run plans, or that contain coinsurance obligations on the part of the policy holder are now permitted to satisfy this requirement.
For more information on these temporary guidelines, check out the FHA’s mortgagee letter.