NEW YORK – May 21, 2013 – Real estate columnist Ken Harney says that FHA officials assured him the agency is not trying to exclude hundreds or thousands of condominiums nationwide from qualifying for financing under its mortgage insurance program.
However, he says FHA’s abrupt, new “no-tolerance” stance has many condo associations wondering if that’s true.
The issue is complicated, and it revolves around language tucked away in many condo complex’s covenants, conditions, and restrictions (“CC&Rs”). While the CC&Rs may ban rentals for periods of 30 days or less, many also have a seemingly innocuous exception to that rule – one that allows units taken back via foreclosure by mortgage lenders or investors to rent the unit for 30 days or less.
Until recently, FHA showed little interest in the 30-day language. A few weeks ago, however, it started rejecting applications. According to Harney, Department of Housing and Urban Development (HUD) lawyers claim the 30-day language violates a 1994 amendment to the National Housing Act.
The Community Associations Institute has received numerous complaints from members upset by what they consider a sudden and unannounced policy shift. Harney says FHA is “aware of the problem,” but “had no choice” in taking the action.
Source: Inman News (05/21/13) Harney, Ken
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