Condo Media - December 2012 - 28

LEGISLATIVE UPDATE

FHA’s Revised Condominium Guidance
Elicits More Praise than Rage this Time
hree may turn out to be the charm for the Federal Housing Administration (FHA). The agency’s most recent guidelines for condominium loans — its third effort in the past four years to address the issue — is the first to draw words of praise rather than howls of outrage from industry executives. “This is excellent news for sellers, buyers, condominium communities and the housing market across the country,” said CAI Chief Executive Officer Thomas Skiba, CAE. “FHA has responded to the critical issues we’ve raised,” he added. “We hoped this would happen a lot sooner, but it’s an important step in the right direction.” Stephen Marcus, a partner in the Massachusetts law firm Marcus, Errico, Emmer & Brooks, who has been involved in ongoing industry negotiations with FHA officials, agreed that the agency has addressed most, if not all, of the industry’s concerns. “There might be some complaints that they didn’t go far enough in some areas and didn’t address every concern,” Marcus said, “but what they changed, they changed for the better. You don’t hear anyone screaming, ‘I can’t believe they did this.’” And unlike revisions, and re-revisions of prior drafts, in this one, the agency did not give relief with one hand and (in the words of one industry executive) “deliver a sucker punch with the other,” by adding a new restriction or additional requirement that hadn’t been included before. The new mortgagee letter outlines standards community associations must meet to win FHA certification,

T

which is required to make units in those communities eligible for FHA financing. Industry executives had complained that prior guidance established requirements that most communities would be unable or unwilling to meet, reducing the availability of FHA loans (which have become an important source of mortgage financing), and making it more difficult for condominium owners to sell their units or refinance their mortgages.

so unreasonable and the liability it created so open-ended, they were advising their community association clients not to sign it — even if that meant foregoing FHA certification. The FHA’s revised guidance modifies the certification language, eliminating the continuing obligation to report adverse changes and requiring HOA representatives now to attest only that: • To the best of their knowledge, the information in the approval request is accurate; • They have reviewed the project application and “upon the advice given by an attorney,” believe it meets all state and local laws; • They have reviewed the application and it meets all current FHA condominium approval requirements, and • They have no knowledge of circumstances or conditions that may have an adverse impact on the condominium project, specifically including construction defects, substantial operational issues, litigation, mediation or arbitration issues. “Previous guidelines required much more onerous project certification attestation that had put the individual submitting the project approval for the condominium at risk for legal liability,” CAI’s Skiba said in a statement. Andrew Fortin, vice president of government affairs at Associa (the largest community association management company in the country), agrees that the new language is much improved. (In his former role as vice president for government affairs at CAI — a position he left earlier this year — Fortin was the association’s point man in the

Welcome Changes in Certification
The FHA described the changes the agency has made as “temporary” (the guidance will expire Aug. 31, 2014 unless it is extended or revised before then) and necessary to respond to current market conditions. The revisions target three concerns industry executives had identified as particularly problematic — the certification language, delinquency limits and insurance requirements — with certification most problematic of all. The original proposals had required an association representative to certify that the community complies with “all state and local condominium laws and all FHA condominium approval requirements” and to attest further that they know of no “circumstances or conditions that might have an adverse effect on the project or cause a mortgage secured by a unit in the project to become delinquent.” The certification also imposed “a continuing obligation to inform HUD if any material information [submitted] is no longer true and correct.” Most community association attorneys found that certification language

28

CONDO MEDIA • DECEMBER 2012
Condo Media - December 2012

Table of Contents for the Digital Edition of Condo Media - December 2012
