New Federal Housing Administration (FHA) financing rules for condo buyers are already limiting purchases—particularly in new developments.
The FHA is now limiting the number of buyers who can obtain loans insured by the agency in one building, effective as of Monday. The rules also put limits and a lot more restrictions on loans granted to buyers purchasing units in buildings which have too many delinquent owners, poor finances and high quantities of rentals.
It’s understandable the FHA is taking these measures, because approximately 18% of loans the agency insures are either delinquent or in foreclosure. The agency’s financial cushion has dipped below the federal minimum.
Another new rule requires that at least 30% of units in new buildings be pre-sold before the agency insures any loans. The number will rise to 50% in 2011.
Buyers in San Francisco won’t be as affected by the changes in FHA policy as some other, less expensive markets will be. I think the new rules will actually be a good thing in San Francisco; our city is small and one building gone wrong can have a far-flung effect on an entire neighborhood.