As we’ve discussed before, FHA approves Condominium Projects in NC, and that certification process is used to obtain not only FHA Mortgage Loans, but it’s used for USDA home loans and VA loans too. Primarily because of a hard rule against short-term leases, and a requirement for stricter language in the projects covenants, conditions and restrictions (CC&Rs) fewer Condominium Projects in NC Qualify for FHA Financing.
So, when FHA started rejecting requests for approval in the last few months, it’s become a big deal.
According to analysts, we’ve gone from approximately 40,000 projects eligible for FHA, Va and USDA home financing down to 26,652 condo associations approved nationwide. Again, there are large segments of the real estate market in NC that gravitate to this form of housing – especially those who are interested in living in a condo downtown Raleigh, Greensboro, Wilmington and Charlotte.
For First Home Buyers in NC looking for a home that is NOT located in a Rural area – FHA financing is crucial. If it’s suddenly not available or associations find compliance too costly, large numbers of owners and potential buyers — including many of the “underserved” that FHA is statutory required to assist — will get cut out.
The newest NCHFA program for NC First Time Home Buyers offers a 3% down payment and closing cost assistance, meaning that a home buyer looking for a condo would only need a half a percent for the down payment. That money can be a gift, and the low entry point to purchase a home makes the program even more attractive to First Time Homebuyers in NC.
According to Inman News, “when rejected condo associations have complained to FHA about the sudden and unannounced change of policy on short-term leasing, they’ve all gotten the same steely answer: Amend your CC&Rs and get rid of the offending language.”
The specific language that FHA started questioning has been in place for decades, and was initially put in the documents to help Fannie and Freddie manage properties they owned that went into Foreclosure.
The CC&Rs routinely include a standard, innocuous exception for units taken back through foreclosure by mortgage lenders or investors. According to the Association for Condominium Management firms, until a couple of weeks ago, FHA showed little interest in the 30-day language in certifications and re-certifications of projects for insurance.
“Then suddenly, without warning, it began rejecting applications solely because the underlying CC&Rs permitted transient leases by mortgagees “in possession” of foreclosed units. According to HUD lawyers, this violates a 1994 amendment to the National Housing Act.”
Because of the way most Associations are designed, simply making changes like the ones being requested by FHA / HUD will be expensive, time-consuming and in some cases – simply not possible. This is why we said earlier that we think 2013 will be the year that fewer Condominium Projects in NC Qualify for FHA Financing… many of the CC&Rs can only be changed with a full “super majority” of the homeowners – and the changes will need to be drawn by an attorney.
A Condo Project in NC that decides NOT to apply for the Condo approval is really (in our opinion) playing Russian Roulette. Why? Because without the approval they are keeping a large number of potential homeowners away from the project. That could push prices for the condos lower…
So why the sudden switch if FHA itself denies that it wants to reduce its traditional role in the condo arena? Why no advance notice and no willingness to provide a little wiggle room on an issue that the agency itself has ignored previously?
FHA officials last week would say that they “are aware of the problem,” but have limited scope for compromise because federal law prohibits the language contained in the associations’ CC&Rs. Once HUD lawyers spotted the non-complying language in some condo project applications, FHA “had no choice” but to take action immediately.
Have questions about cash needed to close and closing costs, or how the new NCHFA down payment assistance program from the State of NC works? You CAN use these programs to purchase a Condo in NC!
Call Steve and Eleanor Thorne about your particular situation at 919 649 5058. Remember – you might qualify for a Single Parent Grant to purchase a home in NC! Connect with us on Facebook or Google + we’d love to help you make your dreams of buying a home in Raleigh come true!
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