Proposed changes to a federal mortgage loan program that now accounts for a substantial number of all new home loans have Hawai'i lenders concerned that many condominiums in the state could become ineligible for such lending. The proposed changes stem from an effort by the U.S. Department of Housing and Urban Development to reduce fraud and risk in lending through the Federal Housing Administration.
The Mortgage Bankers Association of Hawaii fears that 545 Hawai'i condo projects will automatically lose their eligibility for FHA lending next year under revised rules proposed by the agency.
FHA loans are available for single-family home and condo purchases. For condos, the loans are limited to projects that meet certain requirements, such as those with no less than 50 percent of units occupied by owners, no more than 15 percent of units delinquent on association fees and no more than 10 percent of units owned by one investor. But in some cases these requirements haven't been reviewed after condos obtained initial FHA lending approval years or decades ago.
Under proposed rule changes, all condos automatically would be removed from FHA's approved lending list two years after a project was placed on the list. In Hawai'i, that would mean virtually every condo project on FHA's approved list, or 545 projects, would be removed.
The Mortgage Bankers Association of Hawaii had asked that previously approved condos in the state remain on the FHA's approved list for two years to allow time for more orderly reapprovals. Initially, the removal was slated to take effect Dec. 7 upon implementation of the new rules. However, recently the agency granted a grace period of one year before condos with old approvals will become ineligible for FHA loans unless they are reapproved.
Contact me for more information on how this proposed change may affect your purchase or sale of a Hawaii Kai condo.
Barbara Abe, Realtor
(resource: Honolulu Advertiser)