When H.R. 3700, the Housing Opportunity Through Modernization Act, was signed into law earlier this year, the Department of Housing and Urban Development was given notice it had 90 days to weigh in on regulations related to Federal Housing Administration financing for condominiums before changes automatically went into effect.
These included rules regarding owner-occupancy rates and treatment of spot loans, among others.
In response to H.R. 3700, HUD last week released a proposed rule on condominiums that includes positive changes, like a return of spot loans and an extension of the certification period, but also includes a proposal to set owner occupancy-rate requirements within a range of 25 percent to 75 percent. This is despite a 35 percent requirement laid out in H.R. 3700.
The National Association of Realtors® praised sections of the rule, but remains concerned about the possibility of an overly high owner-occupancy threshold. NAR cited estimates showing that less than 10 percent of all condos are FHA-certified as evidence that more needs to be done.
NAR President Tom Salomone expressed disappointment that HUD chose to defer the owner-occupancy decision, but said Realtors® will work with HUD directly and through comment to establish a data-driven threshold. Below is Salomone’s statement on HUD’s announcement:
“Realtors® have for years raised concerns in Congress over restrictions on FHA financing for condominiums, particularly for first-time and low-to-middle income buyers looking to purchase a home.
“We were joined by a cadre of supporters from all sides, and both the House and Senate unanimously passed legislation this year that answered those concerns and indicated its support for lower owner-occupancy requirements.
“HUD’s proposed rule sets a wide potential range when compared with the 35 percent Congress suggested in H.R. 3700 — a figure NAR believes is a more appropriate and productive threshold.
“HUD has the authority right now to set the owner-occupancy requirement at 35 percent while the regulatory process moves forward, and we would urge them to consider that option rather than defer the decision for an indeterminate amount of time.
“While the proposed rule includes some hard-fought victories, particularly regarding the treatment of spot loans, its treatment of owner-occupancy ignores the legislative intent of Congress and ultimately maintains an FHA regulation that puts homeownership further out of reach.
“To be clear, this is by no means the end of the road. HUD has asked for comment from the public on this proposed rule, and Realtors® will certainly make their voices and concerns heard. We’re disappointed with elements of the proposal, but remain encouraged that our partners at all levels are keeping the spotlight on this important issue.”
*Taken from the California Association of Realtors®
— Alec Bruice is a licensed real estate broker with Santa Barbara Brokers and the 2016 president of the Santa Barbara Association of Realtors. Contact him at email@example.com or 805.637.5774. The opinions expressed are his own.