Blood In the Streets: FHA Slaughters Condos

FHA has made significant changes to rules guiding financing for condos.

Under new Federal Housing Administration rules that took effect Oct. 1, condo loans must meet these conditions:

• Project must be primarily residential.

• No more than 10 percent of the units may be owned by one investor. (This provision is bad for developers.)



• No more than 25 percent of the project's floor space can be commercial use. (This is bad for mixed use projects found in urban centers.)



• No more than 15 percent of the units can be 30 days or more past due on condominium-association fee payments. (This provision eliminates potentially foreclosure ridden complexes.)

• At least 50 percent of the units must be owner-occupied or sold to intended owner-occupants.  (This is bad for resort markets.)

This is going to hurt a lot of condo sales.  I believe, it will create paralysis similar to the multi-unit market.  While bad for sellers, it bay be a boon to saavy investors willing to scoop up unwanted units.  Look for more seller financing for these types of property in the very near future.