Quick Update: Proposed Changes to FHA Condominium Project Approval Process

According to Community Associations Institute (“CAI”), a leading national community association organization, the U.S. House of Representatives will vote today on important changes to the Federal Housing Administration’s (“FHA”) condominium project approval process.  The changes to the FHA condominium project approval process are included in H.R. 3700, the “Housing Opportunity Through Modernization Act”, bipartisan legislation authored by Rep. Blaine Luetkemeyer (R-MO) and Rep. Emanuel Cleaver (D-MO).

CAI supports H.R. 3700 and has urged leaders of the House Financial Services Committee to bring the legislation to a vote in the full House of Representatives.  According to CAI, H.R. 3700 would make the following key changes to the existing FHA condominium project approval process:

• FHA is required to revise condominium recertification requirements so that recertification is substantially less burdensome than initial project approval. FHA is required to consider lengthening the time of certifications and revising recertification procedures to be information updates rather than resubmitting the project for approval.
• HUD field offices may, at the request of the submitting party, evaluate and grant exemptions to commercial space limitations and may take into consideration factors such as the number of housing units in a project as well as local economic conditions when evaluating exemption requests.
• FHA is required to clarify permissible owner occupancy percentages for primary and secondary residences for project approval. If FHA fails to issue the required clarification within 90 days of enactment into law, the owner occupancy percentage for primary and secondary residences is established at 35 percent. FHA may establish different owner occupancy percentages based on local economic conditions.
• FHA is required to follow Fannie Mae and Freddie Mac guidelines concerning transfer fees for condominium project approval and mortgage insurance.

Our office is following this potential development in the law.  Should you have any questions regarding FHA Certification, please contact our office.

UPDATE 2/3/16: H.R. 3700 passed the House yesterday and moved on to the Senate.  If you have any questions, our office is keeping track of this proposed legislation.

UPDATE 6/18/16: H.R. 3700 passed the Senate by unanimous vote and President Obama is expected to sign the bill into law.

Joe Wloszek is a Member of Hirzel Law, PLC where he focuses his practice on condominium and homeowner’s association law, commercial litigation, commercial real estate, large contractual disputes, and related real estate matters. Mr. Wloszek has been a Super Lawyers Rising Star in Real Estate Law from 2013-2018, an award given to only 2.5% of the attorneys in Michigan each year.  He was also named a Top Lawyer in commercial law by DBusiness Magazine in 2014 and a Michigan Top Lawyer in real estate law by Michigan Top Lawyers in 2016. He is a Certified Real Estate Continuing Education Instructor through the State of Michigan and the past Chair of the Oakland County Bar Association Real Estate Committee.  He can be reached at (248) 478-1800 or jwloszek@hirzellaw.com.

*For more information regarding this topic or more, CAI has excellent resources on its website.