Jeff Collins | 11-15-2013
Condos in about 65 percent of Orange County complexes are ineligible for Federal Housing Administration-backed mortgages because their associations lack certification for those loans, officials at the Orange County Association of Realtors say.
Three-year-old regulations have stripped the majority of condo homeowner associations of their FHA certification, zapping the ability for occupants or new buyers to purchase condos using the agency's low-down-payment options.
Concerned about the high rate of condos losing FHA funding, the Orange County Association of Realtors formed a task force last year to encourage more associations to seek certification.
“Agent inquiries started to come in as to why condo projects that had always been FHA approved were suddenly losing their approvals,” said Lisa Dunn, an agent with Casa Bella Realty Group in Laguna Niguel, who chairs the task force. “It became clear we needed to find a way to educate homeowner association management companies as to the importance of obtaining and maintaining their FHA condo project approval.”
The task force developed a presentation for homeowner association boards explaining the benefits of FHA certification, and it's working on an educational video under a recent $10,000 grant from the California Association of Realtors Housing Affordability Fund, Dunn said.
The FHA rules took effect in 2010 and were relaxed only slightly in a February 2012 revision. FHA certification is required for an entire project before agency-backed loans can be issued for any units in that development.
Soon after the rules took effect, condos with FHA certification reportedly fell to about 10 percent of all complexes nationwide.
Condominiums serve as an entry point for homeownership, Realtors and condo-advocacy groups maintain. Dunn (pictured right) said that demand is higher for FHA-approved condos, boosting sale prices for units in approved communities.
“In the spring of 2012, I had a listing in an unapproved condo project in Rancho Santa Margarita. Price reduction after price reduction, I just could not get an offer to come in, even though we were priced well under area comps,” Dunn said. “The day that the association's FHA approval came in, my phone started ringing off the hook and the price soared up $25,000.”
FHA-approved properties also have more owner occupants than rentals, she said. In most cases, owners can't get FHA financing or reverse mortgages in unapproved complexes.
Task force members have met with several condo association boards to discuss the need for FHA certification. “The average HOA director has no idea that this whole situation exists unless a homeowner … brings it up,” Dunn said.
Some HOA board members have resisted getting FHA certification, believing that only marginal homebuyers get FHA loans, she said.
“That could not be farther than the truth,” Dunn said. “FHA loan limits in Orange County are over $729,000, and the borrowers' credit scores are on average over 700.”Back to News | View Related Link
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