Speed and efficiency have never been the hallmark of the Federal Government, so it should come as no surprise that HUD has yet to release the new condominium rules that would help forty thousand buyers and owners in its first year, many of whom are seniors in need of reverse mortgage liquidity.

In the spring of 2016, a bill entitled HR 3700 sailed through the House and Senate, and was signed into law in early summer by former President Obama. HR 3700 was primarily a housing bill, which included a provision to streamline the condominium lending rules and to bring back “Spot Approval”. Spot approval was an FHA condominium-lending program, which allowed FHA financing in a particular project that was not approved by HUD. This provision was included in the bill to increase the amount of FHA lending in condominium projects, which has dwindled since the program was shelved in 2010.

The approved legislation wound its way through the Office of Management and Budget, and was subsequently placed into the federal registry for public comment on the proposed rule change in September 2016. Since this development, absolutely nothing else has been accomplished. Crickets.

Spot approval, now renamed Single Unit Approval under the proposed rule change, would immediately help sellers who currently suffer from FOMO (Fear Of Missing Offers). The cost and time consumption that full project approval requires is a deal killer, plain and simple, and HUD knows this. Single Unit Approval would allow the lender to fund the loan without obtaining full project approval, subject to some minor limitations. It would also eliminate the need to convince the board to vote on the approval of the association since no actual approval would occur under this rule. This would allow FHA buyers to purchase in virtually all condominiums, instead of just the 8% that are currently HUD approved. What makes the delay all the more head scratching is that Spot Approval was a robust lending program from 1996 until 2010. This is not a new program that HUD is developing, but the re-release of an old one.

In May 2017, at the NAR midyear, HUD Secretary Ben Carson was asked about Single Unit Approval and he said “I can assure you that this rule has a very high priority and we’re excited to implement it”. Later in November, he stated that HUD was on the “backstretch of releasing the new condominium rules”. Here we are seven months later and still nothing. Seriously? We know Ben was busy picking out over-priced office furniture, but enough is enough. He must’ve been talking about the backstretch of the Pan American Highway.

The prime home buying season is approaching and rates are increasing. HUD needs to release the program its Secretary has been promising for over a year, and help the large pool of budget buyers and owners to eagerly take advantage of the many benefits of an FHA mortgage. The American Dream can be a reality for many more with this program reintroduction, and many Baby Boomers can get the income they need via Reverse Mortgage while more Millennials finally get the chance to be property owners. Do your job, HUD. The American public is waiting

I’ve looked at and spoken with over ten thousand condominium associations the last eight years regarding FHA approval.  In 2010, when HUD got rid of spot approval(aka Single Unit Approval) and made Approval a requirement, me and the few competitors I have collectively thought  that good times had arrived.  We certainly figured that many associations would seek and get the approval and our small industry was about to get big.

This is not what happened.  Even though approval was now a requirement, less condo associations sought the approval.   This would defy logic:  The government requires it and less of it happens?  Do less of you wear your seat belt now that it is a requirement?

Over the years, I heard the following reasons out of the mouths of board members explaining why they did not want FHA approval:

• We don’t want any of those FHA people=illegal and violates dozens of housing laws.
• If we get FHA approval, we will have section 8=completely untrue.
• FHA borrowers are more likely to not pay their assessment=absurd, baseless and violates many housing laws.
• FHA approval brings down property values=yeah, more demand lowers the value of something.
• FHA buyers only put 3% down=the minimum down is 3.5% but the national down payment is 6%.(sidebar:  Fannie and Freddie has 3% down payment condo loans but you never hear about HOA’s wanting to keep them out).

I’ve heard these and more baseless statements made unfortunately by board members, who were tasked with making the most important decisions about the association. It was the falling number of approved condos that promoted the powers that be to pass the law to bring back the program that eliminated the necessity of approval. It is a certainty that Single Unit Approval will result in a large increase in FHA lending in condominium.

I have been asked innumerable times for my opinion as to why so few HOA’s seek the approval.  The reason so few condos sought the approval is that by and large, since 2010, the condominium market nationwide has been robust.  There were enough cash and conventional buyers that no one had to pay attention to the 30% demand that are FHA buyers.  Now this is changing…

The Case Schiller affordability index is at its historic low, high end markets such as Aspen, Manhattan, South Beach Florida are seeing sales crater 50%, rates are rising and are expected to keep rising, Gary Keller of Keller Williams stated he sees a market correction in 2017, and there are more open house signs lining street corners than at any time in recent memory.

This market and paradigm shift is going to cause sellers have to now value and market to ALL buyers if they don’t want the property to sit.  They are going to finally realize this economic law:

If demand goes up, and supply stays the same, PRICE rises.

So now, in a slowing market, all buyers matter.  And now with the implementation of Single Unit Approval, the clueless and discriminating board members will no longer be able to harm the values of their neighbors by refusing and frustrating the process of approval previously required.  Those owners and FHA buyers own HUD and their elected officials and big wet kiss!