Kenneth R. Harney, a columnist for the Washington Post, on Friday published an illuminating column on the impact the new FHA guidelines are having on the condominium market. Mr. Harney characterized this chilling effect when he wrote: “This, in turn, has abruptly shut off loan money for would-be buyers and refinancers, forcing them to pursue conventional bank loans requiring much higher down payments – sometimes 20 percent higher compared with FHA’s 3.5% minimum – which they often cannot afford.” 

The inability of many condo associations to qualify under the new guidelines has already yielded a significant decrease in FHA-backed loans. Harney noted: “. . . the agency’s total volume of new condo mortgages has plunged in the past year. According to FHA’s data, it insured 51,343 condo loans between October of last year and August of this year, a decrease of 41 percent from the 87,102 loans it insured during the same period in 2009 and 2010. 


Is FHA going to take a closer look at the impact the new guidelines are having on the condo market? Are the new guidelines a way for FHA to quietly get out of the condominium insurance market? Is the federal government aware that it’s essentially tanking a significant portion of the condo market in these tough economic times? Do the feds care? Only time will answer these tough questions.