New Law Reduces Federal Restrictions on Condominiums

Stephen G. Davis
Associate at Carmody MacDonald P.C.

St. Louis, MO, August 3, 2016 – Condominium owners may soon find it easier to purchase and sell their units, due to a newly signed federal law which will relax restrictions on Federal Housing Administration (FHA) mortgage insurance. On July 29, 2016, President Obama signed the Housing Opportunity Through Modernization Act of 2016 into law.  This bipartisan legislation was sponsored by Missouri Reps. Luetkemeyer and Cleaver.  Title III of the Act contains provisions designed to modify FHA restrictions on the purchase and sale of condominium units.  The FHA impacts the ability for condominium owners to sell their units and potential buyers to purchase units in a number of ways, including: (1) requiring that the condominium project apply and be certified by the FHA, (2) requiring regular recertification, and (3) requiring compliance with certain owner-occupancy restrictions. 

The Act amends the National Housing Act by directing the FHA to modify its certification requirements in a way that will “streamline the project certification requirements . . . so that recertifications are substantially less burdensome than certifications.”  The FHA must consider lengthening the time between certifications and allowing condominiums to provide updates rather than full resubmissions.  Within 90 days, the FHA must issue guidance on the percentage of units that must be owner-occupied for a condominium project to be certified by the FHA, and for units therein to be eligible for FHA mortgage insurance.  If the FHA does not issue guidance within 90 days, the owner-occupancy requirement will be 35% of all family units, which the FHA may increase on a project-by-project basis or regional basis, considering the local economy and the total number of family units. 

The Act addresses commercial and non-residential space in a condominium project seeking FHA certification, and requires that the FHA consider factors related to the local economy.  The Act requires that the FHA apply the same standards of the Federal Housing Finance Agency relating to encumbrances under private transfer fee covenants in the same way as those standards apply to mortgages by Fannie Mae and Freddie Mac. 

The full text of Title III: (beginning on page 25).


About Carmody MacDonald P.C.

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About the Author

Stephen G. Davis joined the firm’s litigation group in May 2016. He enhances the firm’s litigation capabilities in the St. Louis, Missouri metropolitan area by providing a full range of litigation services with an eye toward aggressive and affordable representation. He currently represents over 80 associations in the Condominium and Community Associations.


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