From the August issue: Frances Katzen, an executive vice president at Prudential Douglas
Elliman, was elated when she found a buyer for the one-bedroom she was
representing in a Lower East Side condo conversion.
The transaction went awry, however, when the buyer learned at the
closing table that the financing she had been counting on had fallen
through, thanks to an obscure loophole in guidelines by the Federal
Housing Administration: Loans insured by the FHA currently cannot be
issued in a condo conversion until at least one year after the condo
has been declared effective.
The buyer “got all the way to the closing and was told that the
mortgage was not issued,” recalled Katzen, who now refuses to work with
FHA-insured loans, despite the fact that the government-backed
mortgages are exploding in popularity.
