New regulatory guidance designed to streamline the Federal Housing Administration's approval process for condominiums nationwide is expected to have an immediate impact in the state of Michigan, where single-family projects are frequently developed under a condominium structure, according to the National Association of Home Builders (NAHB).
While most of the new rules announced on June 12 by the U.S. Department of Housing and Urban Development will not take effect until October 1, a provision that eliminates the need for FHA approval of "site condominiums" that are prevalent in Michigan, but may also exist in other states, will take effect immediately, opening the door for thousands of home buyers to use low-downpayment FHA financing to purchase new single-family homes.
"With FHA loans becoming an increasingly significant share of the market, this new rule will help home builders in Michigan and other areas to sell more new homes to buyers who are having difficulty obtaining conventional financing," said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. "We are hopeful this will provide a much-needed boost to struggling housing markets such as Michigan's."
In addition, HUD's Mortgagee Letter 2009-19 authorizes certain FHA-approved lenders to review and approve condo projects internally. It also streamlines the environmental review requirement for condo projects while setting presale and owner-occupancy requirements at 50 percent.
With the economic downturn and an acute shortage of low-downpayment mortgage money, FHA has become increasingly popular among young buyers. Under the FHA program, consumers can put down as little as 3.5 percent on the purchase of their home.