HUD has not allowed a lease term of less than 30 days since at the release of HUD Handbook 4265.1 appendix 24 in October 1980. Admittedly since the release of mortgagee letter 11-22 in
2011 they have become more detail oriented and thus have been stricter about all guidelines, but it's hardly a new development in FHA approval.

I'm also Curious where the figure of 30% of condos not being eligible for FHA approval came from. I have processed hundreds of approvals in the past five years and only had the minimum allowed lease term be an issue a handful of times.

In my experience condos that have a leasing provision allowing transient use are located in areas that have active tourist seasons.

Now, there are condos that have had this language for years and maybe didn't even know. To them I say, if you want to be able too accept FHA financing now or in the future, amend your governing documents. This leasing restriction has been around since before many of todays first time home buyers were born and will be around for years to come.

If the argument is that this provision allowing transient leases allows the banks can rent out foreclosed properties my question is this. What bank does that?

During the foreclosure process the bank will often - literally - pays the occupants to leave the property as soon as possible in a process commonly known as "cash for keys".

If the same argument is applied to a unit owner facing financial hardship the unit owner would not be looking for a short term tenant but more likely be trying to find a longer term occupant.

To that point in an FHA Approved condo not only can units to be leased HUD requires that the condo association allow unit owners to lease their unit.

The fact of the matter is FHA approved condos only make up about 12% of all condos nationally. It's also a fact that FHA approved condos have access to a 41% larger buyer pool of fully documented borrowers. I re-iterate, 12% of condos have access to 41% more buyers than comparable non-FHA approved condos.

A larger buyer pool means more offers and greater competition and you don't have to be an expert on the principles of supply and demand to realize that the availability of FHA financing has a positive effect on the desirability and value of condos. Not to mention FHA loans are the only fully assumable mortgage product around today.

CJ Tholberg

FHA Approval Consultant
www.capcamerica.com

The Sellers of condos will be hurt and should be outraged by FHA's limitation of the condo Buyer's pool. Sad