A promising rule announced last week by the FHA will make it easier for condo owners to get HECM reverse mortgages and other FHA financing.
The FHA established a new process for condominium approvals, effective October 15. It will expand FHA financing for first-time condo buyers, seniors purchasing a condo using the HECM For Purchase loan, and seniors who want to access the equity in their condo using a traditional HECM. Debt Service is never required with a HECM. The minimum age to qualify is 62.
“Condominiums have increasingly become a source of affordable, sustainable homeownership for many families and it’s critical that FHA be there to help them,” said HUD Secretary Ben Carson. “Today, we take an important step to open more doors to homeownership for younger, first-time American buyers as well as seniors hoping to age-in-place.”
This rule is being implemented partially in response to the demands of the housing market, and is aimed at including reverse mortgages for seniors who wish to age in place in a condominium unit, according to Acting HUD Deputy Secretary and FHA Commissioner Brian D. Montgomery.
“For seniors, part of our mission is to provide affordable options to age in place. Condominiums can make a lot of sense for many seniors [for reasons of affordability],” Montgomery said on a conference call with reporters. “Our single unit review now also includes reverse mortgages, known as Home Equity Conversion Mortgages (HECMs), designed to help seniors age in place.”
Gisele Roget, FHA deputy assistant secretary of single family housing, also clarified that the previous rules governing condo approvals shut out a lot of senior condo owners from obtaining a HECM in the past, and this new rule will help to address that.
“We recognize that many seniors live in condominium projects that were unable or unwilling to go through the process of FHA’s project approval,” Roget said. “And so, by allowing HECM borrowers to utilize the single unit approval for HECMs, they will be able to age in place in condominium projects that do not have the overall FHA project approval.”
Commissioner Montgomery added, “Whether it’s a traditional HECM, a HECM For Purchase, or just a first-time homebuyer, we’ve spent a considerable amount of time studying the ranges. […] “We wanted to avoid some of the pitfalls of the housing crisis, and this is a message that we heard loud and clear. We’ve worked closely with groups out there, and obviously with our own Office of Policy Development and Research.”
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