FHA Update

by Robert M. Nordlund, PE, RS
May 2010
Association Reserves, Inc.

Growing and stretching from about 3% to now insuring approximately 30% of all condominium home loans, the Federal Housing Authority (FHA) is attempting to process loans at a historically unprecedented rate. Their rules are back under review.

At the time of this writing, the FHA is wrestling with conflicting objectives: they want to help boost an increase in sales of condominium units (often from non-paying delinquent owners to new owners capable of paying the monthly assessments), but are trying to stay away from insuring mortgages in high-risk associations. Understandably, The FHA doesn’t wish to join the list of organizations needing a government bailout.

Association issues under review are:

Delinquency rates

  • No more than 15% of units over 30-days delinquent (perhaps moving that to a qualified percentage, or a 60-day or 90-day evaluation).

Owner-occupancy ratio

  • Currently the FHA will not approve loans at associations less than 50% owner-occupied. The FHA is considering some flexibility here, specifically since owner-occupied is not strictly tracked at many associations.


  • Budgets and financial statements are currently required, but the FHA is considering raising the standard to those documents requiring an annual “review” or “audit”.

There appears to be no talk of change at this time to the FHA’s 2009 policy requiring Reserve contributions to be at least 10% of the total budget. As we hear of changes, we’ll pass that news on to you.

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