New FHA rules cause condo headaches

From the November issue: Is a little-publicized switch in federal mortgage policy causing huge problems for condominium sellers, buyers and home-owner association boards across the country — even depressing prices and blocking refinancings?

Condo industry leaders, from the 30,000-member Community Associations Institute to individual unit owners and real estate agents, are emphatic that the answer is yes. They say a series of rule revisions by the Federal Housing Administration has caused thousands of condo projects to become ineligible for FHA mortgages. This, in turn, has abruptly shut off loan money for would-be condo buyers and refinancers, forcing them to pursue conventional bank loans requiring much higher down payments — sometimes 20 percent and higher versus the FHA’s 3.5 percent minimum — that they often cannot afford. [more]