Condo Communities Can Look to Reverse Mortgages and FHA loans again Once Regulations are Adopted
The most relevant provision of the changes will emulate the FHFA’s rules regarding the transfer fees for FHA mortgages including reverse mortgages. In July 2015 FHA began refusing to approve condominiums in higher cost communities such as Rossmoor in Walnut Creek, CA because of the Golden Rain Foundation Membership transfer fees.
For the moment reverse mortgages and FHA loans and Rossmoor are still not allowed. Current homeowners and future homeowners in Rossmoor must await the close of the comment period November 30th and publication of a final rule. There is no timeline for issuance of rules. HUD takes whatever time it needs to review comments, then when done publishes a final rule, generally for effect 0-30 days later.
Passed unanimously in both the U.S. House and Senate, and signed into law by President Obama on July 29, 2016, H.R. 3700 resolves a number of uncertainties regarding FHA’s condo provisions. The mortgage industry is still awaiting the close of the comment period and publication of the final rule, but here is a look at the provisions as they stand:
- Reduces the FHA condo owner occupancy ratio to 35%
- Gives FHA the ability to substantially reduce burdens and streamline the condo re-certification process
- Provides more flexibility for mixed use buildings.
- Emulates the Federal Housing Finance Agency’s (FHFA) rules regarding private transfer fees for FHA condo lending.
- Allows for approved lenders to directly endorse Rural Housing Service (RHS) loans.
- Will streamline programs for federally-assisted housing programs
For comprehensive details of the HR 3700 bill, click here.
Condominium communities, like Rossmoor Senior Adult Community in Walnut Creek, CA are impacted. Soon, current homeowners and potential buyers of condos will once again have access to more flexible FHA financing opportunities including reverse mortgages.
The changes will benefit more than just Rossmoor. Lowering the owner occupancy requirement to 35% will be a big benefit as well meaning communities with high rental ownership will now be open to home buyers with FHA financing.
“Condominiums often represent an affordable option that’s just right for first-time and low-to-moderate income home buyers. Unfortunately, overly-burdensome restrictions on condo financing have for too long put that option out of reach for many creditworthy borrowers,” said Tom Salomone, President of NAR and broker-owner of Real Estate II Inc. in Coral Springs, Florida.
I look forward to having this legislation signed into law so more options are opened up for all. We will keep you updated on the progress as it happens. Please contact us for a strategic look at your real estate financing needs. I can be reached at www.signetmortgage.com.
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