The Department of Housing and Urban Development (HUD) has been dragging its feet on finalizing its rules for condominiums that can receive financing from the Federal Housing Administration, and industry groups have had enough. The National Association of Realtors® recently issued a letter to HUD Secretary Ben Carson urging him to issue the long-awaited final rule. “For far too long, worthy borrowers have been unable to purchase the home of their choosing because of FHA’s unfairly restrictive rules on condominiums,” NAR stated. “Ten years is far too long for this problem to have endured, stifling the U.S. housing market and our overall economy.” NAR said there are approximately 145,000 to 155,000 condominium developments in the U.S., and that homeowners in many of these buildings are shut out of FHA financing under the current rule. Only 9,427 of the 52,410 applications submitted for FHA approval were accepted, NAR said.
In 2009, FHA restricted its condo approval process, limiting the number of properties that could receive FHA loans. But in 2016, FHA caved to pressure from trade groups and members of Congress who insisted that too many first-time homebuyers, seniors and urban residents were being negatively impacted by the current rule. It issued a proposal that would lift a number of restrictions, streamline the recertification process and bring back spot approval for condos in non-certified developments. But apparently, that’s where the progress stopped.