First it was going to be October 1, then November 2. That’s when new FHA condo approval rules were going to be implemented. Now it’s December 7. I know it’s shocking but the government just can’t seem to get their act together – in this one rare instance.
One of the more significant items we’ve been waiting for is some relief on the restriction that condo associations can not be approved if they have the right of first refusal. On the one hand, I’ve never understood why condo associations have this right anyway – like they’re going to have the funds to buy a condo and do what with it? On the other hand, I never understood why FHA cared – as long as it’s not discriminatory. But forever promising to remove this restriction on the right of first refusal one month from now is leaving condo associations in limbo. Why incur the legal expense of changing the bylaws to relinquish the right when the government is going to relax the requirements in just one month? However, with 36% of the buyers using FHA mortgages how can the associations afford to keep waiting?
As if this issue weren’t thorny enough, some folks within the mortgage industry aren’t exactly optimistic that things will get better even with the new rules. According to Tom Fishwick of Guaranteed Rate, “I am not sure how much easier it will be once whatever changes do go into place. Clearly they are having trouble figuring out how to implement the changes. As it stands now, they will need to review every single condo building that gets an FHA loan. Currently the spot approval allows an FHA underwriters to sign off on the easy projects once they confirm those basic questions. [with the new process] I am expecting long delays, if not a tougher qualification process, even if they will allow for a right of first refusal. For now I am cheering every time they announce another delay.”