July 15, 2016—In a burst of pre-recess productivity, the U.S. Senate unanimously approved H.R. 3700, the “Housing Opportunity through Modernization Act”.  President Obama is expected to sign the bill into law.

The Act makes important changes to the Federal Housing Administration’s (FHA) condominium approval process. Unless a condominium association is certified by FHA, lenders may not offer borrowers FHA-insured mortgages.

“H.R. 3700 becoming federal law is important, but the real test is the pending release of FHA’s updated condominium regulations,” said Dawn M. Bauman, CAI’s Senior Vice President of Government and Public Affairs. “The benefits of H.R. 3700 will be swept away if FHA seeks to undermine community association lien priority statutes in its pending condominium regulation update.”

In May, the FHA moved to severely limit the access of senior citizens to the agency’s popular reverse mortgage program if these seniors live in a state with association lien priority. With 20 states and the District of Columbia having adopted an association lien priority statute, CAI projects more than four million senior citizens living in condominiums will be denied access to FHA-insured reverse mortgages.

Under the Act, FHA is required to make the following changes to the agency’s condominium approval process—

  • ​FHA must establish and implement a recertification process that is substantially less burdensome than initial certification
  • FHA must cease and desist from rejecting condominiums that use transfer fees to fund association operations
  • FHA must lower the owner occupancy limitation from 50 percent to 35 percent
  • FHA must provide additional flexibility for condominium projects with commercial space

“CAI supported H.R. 3700 and commends the Senate for passing this important legislation,” said Tom Skiba, CAI’s Chief Executive Officer. “The absence of FHA from the condominium mortgage market has harmed consumers. H.R. 3700 is a good first step in making FHA relevant again to condominium associations and homebuyers.”

​In 2009, FHA implemented a number of changes to the agency’s condominium approval requirements. As a result, the number of FHA-approved condominium associations has plummeted. Of the approximately 152,000 condominium associations in the nation, CAI estimates fewer than 14,000—less than 10 percent—of all condominiums are currently approved by FHA.​

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