From a recent CAI Press Release:
CAI Applauds Congressional Input on Mortgage Issues
FALLS CHURCH, VA, NOV. 10, 2011—Congressional leaders are expressing serious reservations about Federal Housing Administration’s (FHA) mortgage-approval policies for condominiums—policies that are the source of mounting confusion and angst for condominium boards, homeowners and real estate agents nationwide.
Community Associations Institute (CAI) says these policies are preventing many potential buyers from obtaining FHA-backed loans to purchase homes in those communities, putting entire condominium associations at risk and further worsening the already dismal residential real estate market.
While acknowledging the need for thoughtful and financially sound lending criteria, the 31,000-member organization has expressed public concern about past FHA lending guidance that has created continued “confusion and frustration” in the marketplace. That’s why CAI sought to bring Congressional attention to the issue.
“There seems to be an invisible barrier between FHA and condominium associations,” Sen. Scott Brown (D-Mass.) said in a recent letter to Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development (HUD). FHA falls under HUD’s jurisdiction.
I think there is no doubt that FHA, and Fannie and Freddie, are taking a harder look at loans to buy condos. Why wouldn't they? Many projects are in big financial trouble due to owners being in foreclosure and not paying assessments, and banks holding units and simply refusing to pay assessments. Add to that the fact that these building need maintenance and the reserves are not there, typically, and even more so now that solvent owners are getting squeezed harder than ever. But if FHA is going to guarantee the loan, or if Fannie or Freddie are going to buy the loan, they have to be careful. The taxpayers have already sunk a fortune into Fannie and Freddie since 2008 to pay for their purchase of bad mortgage backed securities. They don't want to get stuck with bailing out the nation's condo associations, especially if the entire institution is of questionable sustainability (as I have been arguing for years.)
Oh, and one suggestion for CAI: Scott Brown is not a Democrat. He is a Republican. Maybe you should correct that.