Issue

FHA Policy

NAR Action/Position

Owner-Occupancy Requirements for Established Projects.

Current 51% minimum owner-occupancy requirement being reduced to 50%, effective 11/2/09.

FHA is considering a further reduction of the owner-occupancy requirement to 30%.

NAR wrote HUD on 7/31/09 asking that FHA remove owner-occupancy limit [FHA buyers are owner-occupants initially so there is no need for a rule for investors].

On 10/28/09, NAR wrote FHFA Director Lockhart raising concerns about GSE owner-occupancy requirements. NAR has emphasized with the GSEs the importance of retaining the current policy for buyers who will be owner-occupants.

Condominiums - Owner-Occupancy Requirements for New Condo Projects.

Current 51% limit being reduced to 50%, effective 11/2/09.

FHA is considering a further reduction of owner-occupancy requirement to 30%.

NAR wrote HUD on 7/31/09 asking that FHA remove the owner-occupancy limit [FHA buyers are owner-occupants initially so there is no need for a rule for investors].

Condominiums - Pre-Sale Requirement for New Condo Projects

50% presale required before any endorsement by FHA.

FHA is considering reducing presale requirement to 30%.

NAR wrote HUD on 7/31/09 asking FHA to reduce or eliminate the presale requirement.

Condominiums - 30% Concentration Limit

Effective 11/2/09, FHA plans to impose a limit of 30% on the number of units that may be FHA insured.

FHA is considering raising concentration limit to 50%.

NAR wrote HUD on 7/31/09 asking FHA to eliminate the concentration requirement or, at least, increase it.

Condominiums - Limit on Commercial Space in Condo Projects

25% limit.

NAR has informally conveyed member concerns to the GSEs and FHA that the commercial space limits are unduly restrictive.

Condominiums - Elimination of Spot Loan Approval Process

Effective 11/2/09, FHA will no longer offer spot loan approvals where the project has not been approved.

NAR has informally conveyed to FHA the member concern that this change will limit the ability of consumers to use FHA loans in some projects. FHA believes that streamlining of its project approval process will minimize this problem.

Condominiums - Reserve Study.

FHA requires an annual study that insures adequate funds are available for capital expenditures and maintenance.

NAR wrote HUD on 7/31/09 asking FHA to provide clarification and guidance. NAR raised concerns that the study could create confusion and be burdensome.

Condominiums - Waivers

FHA will consider waiver requests to its condo policies.

In response to NAR concerns about overly tight condo policies, both the GSEs and FHA have noted their waiver authority. [Lenders may have more restrictive lending policies but sometimes blame GSE or FHA policy.]

Appraisals – Requirement for two appraisals

FHA requires two appraisals for properties above $417,000 in declining markets where LTV exceeds 95 percent.

On 08/14/2009 NAR wrote HUD asking to eliminate the requirement for a second appraisal as it is redundant and does little more than increase the cost of the transaction for the borrower.

Appraisals – 90 Day Comparables

ML 2009-09 requires 2 comparable sales that closed within 90 days of effective date of appraisal.

On 09/15/2009 NAR wrote HUD asking FHA to adopt Fannie Mae policy which allows comps to be up to 12 months old (comps 6 months and older must be accompanied by explanation from the appraiser).

Appraisals – Codified FAQ with Freddie Fannie

Fannie Mae and Freddie Mac have developed separate FAQs regarding HVCC. FHA has recently adopted components of HVCC.

NAR has called on FHA and the GSEs to formally adopt a unified FAQ to be codified into existing appraisal policy.

Single Family - Flipping Rule

FHA prohibits a mortgage from being insured by FHA if the sale of the property that will be the security for the mortgage is within 90 days of acquisition by the seller. FHA has implemented a waiver for certain lenders and bank owned REOs.

NAR is considering recommendations to enhance this policy considering the high number of foreclosed properties available in the real estate market. NAR may recommend eliminating this policy assuming adequate protections for the MMIF can be implemented.