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While the Federal Housing Administration has loosened its condominium approval requirements in recent years, many properties continue to struggle to meet overly stringent criteria and the majority of properties are being denied. That’s according to a panel of industry experts gathered last week at the “How Do FHA Condominium Rules Impact Your Business?” forum at the 2013 REALTORS® Conference and Expo.

Condominiums are often the most affordable homeownership option for first-time buyers, small families, single people, and older Americans, especially when purchased with low downpayment FHA-backed condo mortgages, which are among the strongest performing loans in the FHA portfolio. However, FHA data show approximately 60 percent of condo projects seeking approval in 2013 were denied, that’s up from 2011 when only 20 percent of projects were denied.

Joanne Kuczma, housing program officer in the Office of Single Family Program Development at the Department of Housing and Urban Development, cited the top reasons for FHA projects being denied approval, including financial instability, pending litigation, insufficient insurance coverage, and outdated or missing documentation, among others.

“The goal isn’t to reduce FHA’s footprint in the condo market, but to ensure that homeowners are buying into a viable, sustainable homeownership opportunity,” said Kuczma. She said HUD is working hard to improve the approval process and is considering changes, such as reinstating spot approvals for individual condo units in projects that aren’t already FHA approved.

Jim Cantrell, president of Cantrell, Harris and Associates, a real estate management and consulting firm in San Francisco, agreed with the top reasons for why projects are denied and offered advice to attendees for helping get condo projects approved.

“It’s critical to ensure that all the required documents are completed and filed correctly,” he said. “My advice is to ask the right questions of the right people and get it done right the first time; otherwise the process will be prolonged and that puts the condo sale at risk.”

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