Stricter Condo Lending Rules to Avert Government Foreclosures

by cassy82 | October 20, 2009 at 06:44 am

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The Federal Housing Agency has tightened its rules on condominium lending in an effort to avert government foreclosures. The rules will determine the condominium developments that will qualify for mortgage loans with low interest rates.

The languishing economy and rising unemployment rate are driving the number of government foreclosures to the roofs. As part of an effort to address the growing foreclosure problem, the U.S. Federal Housing Administration (FHA) has tightened its rules on condominium lending.

The rules, which cover condominium developments that will qualify for FHA-supported mortgage loans with low interest rates, will take effect on November 2. Under the new lending rules of the FHA, a condominium development should be 50 percent sold and at least 10 percent of the condo units are owned by one individual.

Additionally, loan delinquencies are allowed only on 15 percent or less of the units in the condominium buildings. Industry experts said that the stringent rules could help many condominium owners avert government foreclosures as they will be given affordable mortgage loans.

By Cassiano Travareli