FHA/HUD Requirements Update Better Get In Compliance!

 Even in 2013, with the economy slowly recuperating and markets improving, the  words “housing crisis” still have the power to send shivers down the spines of homeowners who are  still feeling the effects of the collapse of the market in 2008. That collapse  was itself triggered for the most part by the writing of “bad” mortgages to homeowners who couldn’t afford to pay. While homeowners in the tri-state area escaped much better than  most of the rest of the country, the long-term repercussions can still be felt  here, especially among condo and co-op owners.  

 In response to what was happening at the time, the Federal Housing  Administration and U.S. Department of Housing and Urban Development severely  tightened their requirements for how much money buildings must carry in their  reserve funds before prospective buyers can secure loans to purchase units  within the building.  

 Bruce Weltin, associate vice president with home lender Shamrock Financial  Corporation, says that new lending guidelines from HUD mean that FHA loan  requirements will be significantly tightened for condominium sales and that may  have a profoundly negative effect on the ability to sell or buy a condominium  unit that requires FHA financing.  

 New Game, New Rules

 It was about 30-40 years ago that loans started to be securitized, which means  they package loans together and sell them through the security markets. Most of  those go through Fannie Mae.  

 “What happened when all these loans started going bad, Fannie Mae started having  issues and started looking at what they could have done to prevent this,” says Stephen Beer, CPA, of the certified public accounting, auditing and  management consulting firm of Czarnowski & Beer, which serves co-ops and condos from New York City to Florida. “So, they came out with new guidelines, where banks have to follow a selling  guide if they are going to be able to sell their loans to Fannie Mae. While  meeting criteria for Fannie Mae, the bank figures if they have rules, they  should have it on all their loans, so it ended up becoming the standard.”  

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