HUD Does it Again!
Thursday, August 13th, 2009
Is it my imagination, or do bureaucrats stay up late at night thinking about new ways to make life difficult for all of us? In an effort to re-regulate the regulations recently imposed on the builders, sellers and buyers of condominium homes, the U.S. Department of Housing and Urban Development (HUD) has decided that “…no more than 30 percent of the total units …” in a condominium project may be purchased with an FHA insured loan product. And, HUD has decreed that “at least 50 percent of the total units must be sold…” in a condominium project before closing the first escrow with an FHA insured loan product. HUD Mortgagee Letter 2009-19.
These two new requirements appear on pages 4 and 5 of Mortgagee Letter 2009-19, dated June 12, 2009. Now, to be honest, the letter also states that these new rules “…are effective for all case numbers assigned on or after October 1, 2009…”. That means, any projects currently under construction, with an approved FHA case number, will not be impacted by the proposed changes. Well, thank goodness for small favors.
Condominium homes are generally the first rung on the ladder to home ownership. They normally provide a more affordable product for move-down and first time home buyers. In addition, current land planning and greenhouse gas emission reduction initiatives focus on increasing density in urban areas to promote transit use and slow the impact of growth on the problems associated with global warming. It appears that HUD is trying to promote the reduction of condominium construction and decreased urban densities by making the provision of FHA financing for condos more difficult to achieve.
My plea is for HUD to reconsider their position stated in Mortgagee Letter 2009-19. Do not make affordable housing more difficult to build and sell. Do not take away the best product builders have to deliver housing affordable to the average citizen. Do not incentivize low density development because your new rules create such great hurdles for the construction and sale of higher density product.
Again, the pendulum has swung too far. The regulators are regulating for the appearance of control, while in reality, they do not understand the impacts they are creating.
This is a really stupid policy coming down the pike. The condo boom and bust was fueled by cheap money to investors (and very in-expierenced and unsavvy ones at that, whom did not understand finance, real estate, or how to be a landlord) not first time home buyers. The policy should be the inverse of what it is so that condos can serve more first time buyers and not less. Apparently HUD is going go back to the days of building concrete prisons, I mean tenaments. Way to go HUD.
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Chad,
You got that right. I have noticed a bit more discussion about the policy on blogs and in the newspaper, but still no apparent “re-thinking” from HUD. We need to keep spreading the word.
Steve
NHB,
Spread the word. HUD appears ready to kill FHA as a viable means of purchasing a condominium as your first home … unless you are one of the lucky 30%.
Steve
Steve, Heard today through the mortgage grapevine that HUD will be re-evaluating the 30% rule come November. Stay tuned.
Larry,
I heard the same thing. Check out my soon to be posted new comment on the status of 2009-19.
Steve
[...] August 13th, I posted the original HUD Does It Again! In that post, I noted some serious concerns with the June 12, 2009, Mortgagee Letter (2009-19) [...]