Could condos financed with low down payment government-backed mortgages stage a surprise comeback under the Trump administration, which generally seeks to reduce federal involvement in housing? Would this be promising news for millennials and buyers with moderate incomes looking to purchase their first homes?
You bet — provided you take Housing and Urban Development secretary Ben Carson at his word. Speaking to a Realtor convention last week, Carson said he is “in lockstep” with proposals to revive the Federal Housing Administration’s condo financing program, which has been bogged down with controversial regulations and low volumes in recent years.
When properties are eligible for FHA financing, buyers enjoy lower down payment options and easier credit requirements. CRMLS has collaborated with RatePlug and FHA Pros to add FHA Eligibility Indicators to all condos and townhomes in CRMLS Matrix for members of Associations opting to use the service through the Association Product Co-Op. These subscribers can now simply look for the “traffic light” indicators on each condo and townhome listing in the MLS to determine if the property is FHA approved (green light), conditionally approved (yellow light), or not approved (red light). The new tool also provides helpful information about how to obtain FHA eligibility for unapproved properties.
The National Association of Realtors (NAR) continues to make the case that the Trump administration should reinstate a cut to the insurance premiums on Federal Housing Administration (FHA) loans. Its latest study suggests that cheaper FHA mortgages could be a big help to borrowers in Trump country.
The administration’s move to cancel a 25 basis point cut will affect both high-cost areas, the trade group said, but also wide-swaths of rural and small-town America where FHA use is the highest and where Donald Trump had a strong base of election support.
Prepayment speeds have fallen 40 per cent so far in 2017 and were down 15 per cent last month, the lowest monthly rate in three years.
A first look at data from Black Knight Financial’s loan database for February also reveals that foreclosure starts were down 18 per cent month-over-month and were 31 per cent down from a year earlier. Active foreclosure inventory is 470,000, the lowest since 2007.
The top 5 states by non-current percentage were Mississippi, Louisiana, Alabama, West Virginia and New Jersey. The bottom 5 were Idaho, Montana, Minnesota, Colorado and North Dakota.
Call it a housing policy head fake — one with potentially painful consequences for moderate-income buyers, sellers and seniors in hundreds of condominium projects around the country. If you were thinking about purchasing a condo unit with a low-down-payment Federal Housing Administration mortgage in the coming year, this could affect you.
Last week, ostensibly yielding to a congressional mandate to make consumer-friendly FHA mortgages more widely available in condominiums, the government announced a move to do precisely that: Starting immediately, projects with fewer than half of their units occupied by owners may be eligible for certification for FHA financing. Under “certain circumstances,” the government said, projects with as low as 35 percent owner occupancy might now be eligible.
A financial report due out soon could reignite a battle over whether the Federal Housing Administration should again reduce its annual premium.
The FHA last cut premiums in January 2015, a move that unleashed a lot of pent-up demand for agency-insured mortgages. While many in the industry have been urging FHA to make another cut, the agency has resisted due to concerns about its reserve fund, which rebounded last year but is still being watched carefully by nervous lawmakers.
But the agency is likely to come under more intense pressure to make another cut if independent auditors give the fund a positive review in a report due out in early November.
For many condominium buyers and sellers, the Obama administration delivered what seemed like encouraging news last week: The Federal Housing Administration, once the primary source of mortgage financing for moderate-income and first-time condo buyers, is coming back, big time.
But the real story was more complex.
Under new reform proposals, FHA plans to loosen some of its controversial and strict eligibility rules that have caused condo associations nationwide to abandon the program. It also wants to revive what are called “spot loans” — mortgages for individual units in condo buildings that haven’t received blanket certifications from the agency. That change alone could open up low-down-payment financing for millennials, minorities and others in many of the estimated 150,000-plus condo projects in the United States. The Community Associations Institute estimates that just 14,000 condo projects nationwide — less than 10 percent of the total — are now certified for FHA-insured mortgages.
In response to changing conditions in the condominium market, the Federal Housing Administration (FHA) this past week proposed new regulations governing the approval process for condominium developments.
FHA is seeking to widen the range of thresholds required for FHA approval including the minimum owner-occupants in approved condo developments and limits on commercial/non-residential space. Ultimately, FHA will have the ability to specify new owner-occupancy, commercial/non-residential, and single-unit thresholds.
FHA currently requires that approved condominium developments have a minimum of 50% of the units occupied by owners. While having too few owner-occupants can detract from the viability of a project, requiring too many can harm its marketability, the agency said.
The National Association of Realtors is calling on the Department of Housing and Urban Development to speed up implementation of reforms to the Federal Housing Administration’s condominium reforms.
Legislation signed by President Obama in July that makes numerous reforms to government housing programs included provisions that reduce restrictions on condominium buildings being FHA approved so that more FHA borrowers can purchase condominium units.
The Realtors are hoping HUD will issue an interim proposed rule soon that will allow some of the condo provisions to go into effect right away. But some in the housing industry worry a slow rulemaking process could delay implementation to after the November elections and the transition to a new administration. The Realtors estimate that less than 10% of condominiums currently qualify for FHA mortgage insurance.
After three months of house hunting, auto technician Mahyar Abab and his wife, teacher Ana Abab Marques, are in escrow to buy a home in the Mission Courts condos in Rancho Santa Margarita.
But landing an Orange County home of their own for under $400,000 wasn’t exactly a picnic.
As first-time homebuyers using Federal Housing Administration (FHA) financing, only about half of the condos on the market had the necessary certification that would allow them to buy, said their agent, Bob Wolff.
And without FHA, the Ababs would continue to be renters. With FHA, they only need to put about $13,000 down, or 3.5 percent of the purchase price.
“It’s hard to save for the down payment. It’s hard to save for the closing costs,” said Ana, 44. “Also the price is a little high at this time. And there’s a lot of competition. We made an offer on five places.”
The Ababs were competing with buyers paying 10 to 20 percent down, and in some cases, paying all cash. Some sellers also believe – erroneously, Wolff says – that the FHA process is more rigorous than conventional financing.