New FHA condo rules may hinder mortgages

The Federal Housing Administration is getting ready to implement new rules that could, in some cases, make it harder to get a mortgage to buy a condominium unit. The new rules were supposed to take effect Oct. 1. But the FHA announced in mid-September that it would delay implementation of the new rules until Nov. 2, and that it might modify some of the policies. Of the several new rules and requirements, there are four that most directly affect people who want to buy condos with FHA-insured mortgages:

* "Spot approvals" are eliminated, and now the entire project has to meet FHA approval before a borrower can get an FHA-insured loan.
* A maximum of 30 percent of the condo project's units can have FHA-insured mortgages (there was no such limitation previously).
* Before the FHA will insure a mortgage on a condo, at least half the units must have already been sold (again, there was no such limitation previously).
* At least half of the condo project's property owners will have to occupy their units, down from 51 percent.

That last item is actually a slight liberalization of the rules, but Realtors and mortgage lenders argue that the owner-occupancy rule should be relaxed even more at a time when so many condo units are vacant.

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