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