The Federal Housing Administration (FHA) has released new lending insurance restrictions for condominium buyers and developers.
The FHA’s tighter lending standards include restrictions on buildings with poor finances, too many delinquent owners and a high number of rentals. The agency will also require at least 30 percent of units in new buildings be pre-sold before it will insure any loans; this will rise to 50 percent in 2011.
Before these rules went into effect, buyers needed only a 3.5 percent down payment to be insured.
The stipulations have been set to protect the FHA from insuring loans with a risk of falling into delinquency.
About 18 percent of loans currently insured by the FHA are either delinquent or in foreclosure, and the agency’s money reserves have dipped below the federal minimum.