FHA relax rules on Condo Certification
The FHA has given encouraging news to condo owners by relaxing the rules for condo certification that have caused thousands of buildings across the country to lose their eligibility for FHA financing. The revised guidelines, that were issued September 13 and took effect immediately should make it easier for large numbers of condo associations to seek certification by FHA. This certification process is intended to provide the FHA with key information about a condominium development’s legal, physical and financial status.
Though the previous rules focused on entire buildings, individual unit owners seeking to sell often took the brunt. In one situation a seller lost four signed sales offers and had to reduce his asking price by $81,000 because most buyers wanted to use FHA loans.
The previous rules also required condominium officers to attest that they have “no knowledge of circumstances or conditions that might have adverse effects on the project or cause a mortgage secured by a unit” to become delinquent. The penalty for officers who “knowingly” and “willingly” submitted information to FHA that was found to be false: fines up to $1 million and 30 years in prison….. most condominium officers are volunteers and are not willing to take on that lifetime responsibility.
I predict that the relaxing of FHA condominium certification approval rules for complexes will increase the number of complexes that seek the FHA approval and therefore increase the number of sales in the complexes. It is a win for everyone.