On Tuesday of this week, H.R. 3700 – Housing Opportunity Through Modernization Act of 2015 passed out of the U.S House of Representatives, and yesterday it was received in the U.S. Senate and referred to the Committee on Banking, Housing and Urban Affairs. Why is this significant?

Section 301 of the proposed Act would amend certain parts of the National Housing Act that address mortgage requirements for condominiums. Currently, in order for a condominium unit in a community to be eligible for an FHA insured loan, the entire project must be approved by HUD every two years. The process is cumbersome, time consuming, and expensive. You may recall that this requirement was the result of the national economic recession, and a variety of changes to FHA’s condominium project approvals occurring in 2009 through 2011. Until then, an FHA project certification had no specific termination date. The proposed changes to the National Housing Act will require the Secretary of HUD to streamline the project certification requirements so that recertifications are substantially less burdensome than certifications.

In addition, there is direction to the Secretary of HUD to issue regulations that consider whether to allow exceptions to the condominium project certification process that currently require that no more than 25% of the property’s total floor area can be used for non-residential/commercial purposes. Factors to be considered for exceptions will include the locality of the project, and the total number of residential units in the project.

Lastly, as you likely know if you own a condominium unit in a project that has been approved by FHA, the current requirement is that at least 50% of the units must be occupied by the owner as either a principal residence or as a secondary residence. The proposed act requires the Secretary, within 90 days of the enactment of the law, to issue guidance regarding the number of units that must be occupied as a principal residence or a secondary residence. If the Secretary fails to act within the 90 day period, then the law will automatically reduce the owner occupancy requirement from a majority of owners to require that only 35% of the units be occupied by the owners as their principal residence or a secondary residence, subject to the Secretary’s right to increase the percentage applicable on a project by project basis based on factors relating to the economy for the locality in which the project is located. It will be interesting to see where this bill goes. We’ll keep you posted.