“Housing Opportunity Through Modernization Act” Eases FHA Restrictions

Steven T. Boell      Aug. 1, 2016

On July 29, 2016, President Obama signed into law H.R. 3700 also known as the “Housing Opportunity Through Modernization Act,” which amends the process used by the Federal Housing Administration (FHA) to determine qualification for a low-interest mortgage with FHA insurance. 

Most significantly, it lowers the owner-occupancy requirement from 50 percent to 35 percent.  Current rules disqualify buyers from seeking FHA loans if less than 50 percent of the condominium units are owner-occupied (i.e., if more than 50% are leased). The bill would lower that requirement to a 35 percent owner-occupied ratio. The legislation also requires the U.S. Department of Housing and Urban Development, to rewrite its regulations to make it easier to re-certify a condominiums eligibility and requires FHA to replace existing policy on transfer fees with a less restrictive model.

The legislation had previously been unanimously approved by both the U.S. House of Representatives and Senate and will streamline the FHA certification process, resulting in increased availability of low-interest FHA mortgages to qualifying homeowners. Existing condominiums with leasing restrictions designed to comply with the former FHA requirements may want to consider amending their governing documents to the more favorable standards.


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