Over the past few months, momentum has been building behind the efforts to standardize and streamline the project review processes that lenders use to determine if condominium projects meet eligibility requirements of the government-sponsored enterprises (GSEs).
Currently, condo sales represent about 10 percent of the overall home sales market or roughly 500,000 units per year. In 2015, this translated to approximately $125 billion in mortgages, approximately 80 percent of which were conventional loans, backed by the GSEs.
At the end of March, at the direction of the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, the GSEs introduced a new Condominium Project Questionnaire (Full and Short Form) that lenders can use to collect the information their underwriters need to determine project eligibility.
In announcing the new forms, Freddie Mac said they are “a convenient way to collect information from the HOAs about the condominium project in a consistent and easy-to-understand format.”
It is worth noting that the new forms aren’t mandatory and lenders still have the option of using their own questionnaires, or CoreLogic CondoSafe® questionnaires, as well. Although not mandatory, CoreLogic has already added the new GSE forms to the CoreLogic CondoSafe Platform and can support lenders that will want to use the new forms.
At the recent Community Association Institute’s (CAI) annual meeting, reactions to the new forms were generally positive, and there was an expectation that the FHFA and the agencies would continue to make changes, based on lender and condo association feedback.
Recently, the Veterans Administration (VA) changed some of its condo project eligibility guidelines to make them more flexible and to expand lending opportunities to veterans and their families. Being able to use their VA entitlements to buy in multifamily communities’ benefits both veterans and condo sellers (more on this in a future blog). So much so that at least one state, California, requires condo associations to disclose to their homeowners whether they are a VA-approved project.
Finally, the Federal Housing Administration (FHA) is reportedly preparing new guidelines that will loosen what some observers believe is currently the most restrictive condo approval process.
Housing and Urban Development (HUD) Secretary Julian Castro, speaking at the recent National Association of Realtors conference said, “[W]e’re moving forward on a rule change that’s going to make it easier for folks to buy one of the most attractive options for young professionals and retirees: Condominiums. HUD’s Condo Rule is out the door and with OMB. That means we’re another step closer to giving more builders, sellers, and buyers the market flexibility they deserve.”
While details are still under wraps, housing advocates and COAs are hoping that the FHA will simplify the certification process, allow a greater proportion of commercial space and perhaps again allow for “spot loans.”
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