Tuesday, May 27, 2008

My Day at the FHA: part 2

downpayment assistanceFinding out that the Knickerbocker lofts are the only lofts in downtown St. Louis that have undergone the full FHA approval process was disconcerting. It makes perfect sense though.

A visit to the FHA office in the Robert A. Young Federal Building would clear up all my questions about getting more loft buildings FHA approved.

Getting an FHA loan on a condo doesn't require it to be previously "FHA Approved". The "spot approval" process works to get an individual unit approved. This usually means less work for the lender and a speedy resolution; both important when obtaining financing.

The only problem is that the next time a lender tries to get an FHA loan in that building, the 'spot approval' process must be done again, and again.......

Discussing the situation with lenders, its been said that if one unit in a building is approved, in a perfect world, all other units would also be FHA approved. Unfortunately, this isn't always the case.

So that's the problem in a nutshell.

My first thought is, if the buildings and the residents benefit from easier, smoother or more available financing through FHA, can they participate in getting thier buildings on the FHA approved list?

That was a question that seemed to confuse our friends at the FHA office. "The lender gets the buildings approved, " is what I was told. My reply, "why are lenders choosing to do "spot approvals then?"

The truth is, lenders don't have the time, money, access to condo association records, and really, any motivation to get buildings approved unless it adds to their bottom line. That's just how the system works.

My second thought involes adding to the workload of the condo board members and board presidents out there. The last thing I would want to suggest. Being on a condo board is often a thankless job that must be done for the good of the building. Adding the task of assisting an FHA approved lender at getting the qualified buildings on the FHA Approved Condo List may mean more "up front" work but may reduce the overall workload down the road.

With an increase in market share projected in the neighborhood of 45%, it makes sense for condo associations to start working with lenders and encouraging them to approve the building.

It also is worth a call to your local Congressman to find out why FHA financing is limited to condo projects with less than 30% commercial use. That provision is biased against urban "mixed use" projects and is not something the fine folks at the FHA are even able to explain.

FHA loans are a program that got left in the dust of the mortgage boom of the past decade. Its terms weren't as easy to deal with and there were better options available in the conventional marketplace. With FHA streamlining its programs and making them more "user friendly" combined with the current lending crisis on our hands, it just makes sense to hop on the bandwagon or else suffer the fate of buyer's being steered away from downtown.

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