We were treated to GREAT NEWS in May. In a speech to the National Association of Realtors, Housing and Urban Development Secretary Julián Castro said the Federal Housing Administration (FHA) has completed its promised reforms of condominium mortgage rules and they are only awaiting presidential approval to be implemented.
DC condo sales are strong, with almost 400 units sold last month. That number is at a near record high sold, and up 6% over last year; Nevertheless, greater FHA mortgage availability would have a dramatic impact on the market.
The details have not yet been announced but the changes are expected to greatly expand FHA financing of condominiums. FHA condo loans fell from a high of 90,000 units per year before the 2008 housing crash to just 23,000 units last year. The FHA pull back after the crash had a negative effect on the market, and a reversal would greatly help the owners of condos in DC.
FHA mortgage rules affect DC owners in two ways, 1) building approval, and 2) individual loans. Because of the existing rules, many of the DC condominium “buildings” themselves are not eligible for FHA approval which excludes all owners and potential buyers from seeking FHA financing despite their personal financial abilityand credit worthiness. A change in the rules is expected to reduce the regulation and red tape that discourages many communities, often managed by part-time volunteers, from even applying.
Second, FHA individual loans allow more potential buyers because less upfront cash is needed and less income is required than most other programs. Morever, FHA allows for “reverse mortgages” so more seniors are better able to refinance and afford to keep their units.
An increase in FHA condominium financing will benefit everyone who owns a condo whether or not they have a FHA loan because the building approval and individual loans will increase potential buyers, and thus increase prices.