New Condominium Regulations by FHA

In the most recent FHA guidelines and regulations that are set to be implemented October 1st, 2009 is the following:

FHA Concentration
a. Projects consisting of three or less units will have no more than one unit encumbered with FHA insurance.
b. Projects consisting of four or more units will have no more than 30 percent of the total units encumbered with FHA insurance.

What this states is that FHA will not back more than 30% of any given building. This applies to all condominium projects of 4 or more units. The condominium market is still in shambles and this is going to further reduce the accessability to financing.

At this point in time there are very few condos that are financable by FHA. In downtown Orlando there are only 2 highrise condos that are FHA approved. If you were considering investing or purchasing condos in the near future it appears there will be a rough road ahead for the foreseeable future. There could be many unintended consquences to this enactment like higher vacancies, more investor owned units, decreasing value, and higher HOA fees. Although on the other hand can you blame FHA for not wanting to fund the instability of this market at this time?

This article breaks down the situation of the condo market and it’s volatilty expanding on some of the points above.