Unlike traditional loans with their higher downpayment requirements, FHA-insured loans have become the loan of choice for condominium buyers. According to Benny L. Kass, writing for washingtonpost.com, in 2010, the FHA issued between 30 and 40 percent of all condominium loans. This data was compiled by a national trade organization, the Community Association Institute (CAI) which represents condominium communities and their concerns.
In response to the substantial condominium foreclosures in California, Florida, Nevada, and hoping to limit their exposure to troubled mortgages, the FHA released stringent new rules.
FHA-insured loans for condominiums over one year old must meet the following requirements:
1. No more than 50 percent of the association's total units can have FHA insurance. This rule might relaxed under certain circumstances.
2. No more than 25 percent of the total floor area in the association's buildings, or a single unit, can be used for commercial purposes. There are possible exceptions to this rule, however the floor area can only increase to a maximum of 35 percent.
3. Half or more of the units must be owner occupied.
4. No more than 15 percent of the association's total units can be 30 days past due on their assessments.
The FHA will no longer approve a single condominium unit for a FHA-insured loan, rather the entire condominium complex must be approved. Approval must be recertified every two years. The signer of the certification has a continuing legal responsibility to contact the Department of Housing and Urban Development (HUD) if what he has certified to, changes.
This puts Community Associations on the spot. According to the FHA, if a person certifies certain facts that turn out to be wrong, the FHA can levy fines up to $1 million and up to 30 years in prison. That's quite a responsibility for a board member to take on. With such potentially stiff penalties, would you want to sign the certification?
Contact your association attorney -- only lawyers should provide legal opinions to the FHA.
Jennifer Cook, Raul Aleman and the entire Bahia Realty Group team of real estate professionals welcome the opportunity to speak with you personally to discuss how to help you find, buy or sell your Orlando home or real estate investment property; secure mortgage financing; or help you relocate to the Orlando area. Please call 407-956-5443 or email info@OrlandoRealEstateLink.com for assistance.
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