ACTIVE REAL ESTATE FORECLOSURES FOR SALE IN BIRMINGHAM AL - 07/19/2011

<!--paging_filter-->Is the Federal Housing Administration taking a back-door exit away from condos or Could the agency be tightening its rules in order to cut loan volume in the months ahead, potentially putting thousands of unit sellers, buyers, homeowners associations and realty agents in a mortgage-money squeeze?

ACTIVE REAL ESTATE FORECLOSURES FOR SALE

FHA adamantly denies that it's doing anything of the sort, and insists that new rules rolled out at the end of last month represent prudent responses to the serious risks the agency's insurance funds confront.

But condo industry executives and community managers say FHA's tougher regulations have a wet-blanket effect on associations' ability -- and willingness -- to get their projects approved for financings by the agency. Without an entire project certified, potential buyers of units cannot obtain FHA-backed loans, which in turn makes it more difficult for current unit owners to sell and could depress property values.

<img title="Flickr image courtesy of rvaphotodude" src="http://www.inman.com/files/imagecache/article-photo/files/imagefield/flickr_rvaphotodude_CONDOS_1.jpg" alt="Flickr image courtesy of rvaphotodude." />

ACTIVE REAL ESTATE FORECLOSURES FOR SALE

FHA's low down payment minimums -- 3.5 percent -- and relatively generous credit and debt ratio policies have made it the go-to financing source during the past several years for moderate-income buyers who previously would have sought conventional mortgages. With high-cost-area mortgage limits of $729,750 -- at least until Oct. 1, when they are scheduled to drop -- FHA has even become a player in some upper-end condo communities.

The biggest complaint about the new FHA rules, said Lewis, is the requirement that anyone who signs an application for certification or recertification of a project must assume full responsibility under federal law for the accuracy of every piece of information contained in the submission.

ACTIVE REAL ESTATE FORECLOSURES FOR SALE IN YOUR AREA

Condo boards, unit owners and managers also are upset by other rules from FHA, including:

ACTIVE REAL ESTATE FORECLOSURES FOR SALE

1. A requirement that no more than 15 percent of all units in the project are no more than 30 days delinquent on their condo assessments, including bank-owned (REO) units, which are notorious for nonpayment of fees.

2. A requirement that not only must condo boards carry fidelity insurance on their officers, but that management companies must carry policies as well.

3. A variety of technical rules that may hamper condo conversions and so-called gut rehabs.

ACTIVE REAL ESTATE FORECLOSURES FOR SALE IN YOUR AREA

In response, FHA officials argue that most of the agency's rules track similar requirements in the conventional financing marketplace. Asked whether a calculated phasedown of FHA's condo volume lurks behind the toughened rules, Lemar Wooley, a spokesman for the agency, said "that is not the case. FHA is committed to continuing its mission of providing affordable, sustainable homeownership opportunities while managing and mitigating risk. Our new condo guidance is consistent with that commitment."