New condominium approval rules announced this week by the Department of Housing and Urban Development will make it easier for senior citizens to qualify for Home Equity Conversion Mortgages.
The final rule, which becomes effective October 15, 2019, permits single-unit approvals under certain conditions; extends from two years to three years the amount of time that a condominium property must recertify as being HUD-approved; and allows more mixed-use projects to be eligible for FHA insurance.
The new policies have been highlighted in the Single Family Handbook, 4000.1 or you can read the final rule itself.
“NRMLA congratulates HUD on the publication of its new guidance so that our members might meet the pent-up demand of those seniors who own condominiums and need to leverage their home equity so they might effectively age in place,” said NRMLA Executive Vice President Steve Irwin.
While there are more than 150,000 condominium projects in the U.S., only 6.5 percent are approved to participate in FHA’s mortgage insurance programs. HUD estimated that 20,000 to 60,000 condominium units could become eligible for FHA-insured financing annually under its new policy.
Single-Unit Approvals
Individual units may be eligible for Single-Unit Approval if:
- The individual condominium unit is in a completed project that is not approved;
- No more than 10 percent of the individual condo units are FHA-insured (properties with 10 or more units) or properties with fewer than 10 units have no more than two (2) FHA-insured units.
Minimum Owner-Occupancy Requirements
Approved condominium projects must be 50 percent owner-occupied.
FHA Insurance Concentration in Condominium Projects
FHA will only insure up to 50 percent of the total number of units in an approved condominium project.
Commercial/Nonresidential Space Limits
FHA will require that the commercial/non-residential space within an approved condominium project not exceed 35 percent of the project’s total floor area.
Interim Process for Single-Unit Approvals
FHA will issue a Mortgagee Letter next week that will outline the process for case number assignments for applications utilizing the Single-Unit Approval process.
Industry Briefing and Training
FHA will host a conference call and training webinar in September (details coming soon) to assist mortgagees and other interested parties who need assistance understanding the condo approval requirements. NRMLA will also provide further updates as needed.