The Housing and Urban Development Department (HUD) has instituted a couple of changes to the Fair Housing Administration (FHA) lending policy, as well as a proposal to changes parts of the Fair Housing Rule.
More Condo Buyers Eligible for FHA Financing
First, a new policy announced this week should significantly expand the number of individual condo units as well as condo developments eligible for Federal Housing Administration financing. According to Fox Business, the government will now allow more buyers of condominiums to be eligible for FHA financing with small down payment, as little as 3.5 percent. The vast majority of condos have not been eligible for FHA financing, which has been heavily restricted in the wake of the housing crisis that began in 2006. The new rules, which are expected to extend eligibility to 20,000 to 60,000 additional condo units, go into effect on Oct. 15.
Reduction in Home Equity Withdraws Through Cash-Out Refinances
Meanwhile, Market Watch is reporting that the Trump administration is reducing how much home equity mortgage borrowers can withdraw through cash-out refinances.
Starting Sept. 1, the Federal Housing Administration will limit the loan amounts for cash-out refinancing’s to 80% of the home’s value or less. Previously, borrowers could take out up to 85% of the property’s equity.
The new loan amount limit is in line with the limits already in place at Fannie Mae and Freddie Mac.
HUD Shift Burden of Proof to Defendants in Housing Discrimination
Lastly, the National Community Reinvestment Coalition strongly condemned a HUD proposal to change its interpretation of the Fair Housing Act’s disparate impact standard, a rule enacted by HUD during the Obama administration and used as a way to enforce the Fair Housing Act.
Disparate impact is legal term defined by the use of statistics to hold businesses accountable for unintentional discrimination.
According to HUD, the changes bring the agency’s interpretation of the rule in line with the 2015 Supreme Court ruling, and HUD Secretary Ben Carson said that the rule changes will increase access to affordable housing.
“There is a lack of affordable housing in America today,” Carson said in a statement.
“This proposed rule is intended to increase legal clarity and promote the production and availability of housing in all areas while making sure every person is treated fairly under the law,” Carson continued. “As we have shown time and again, we will challenge any practice that discriminates against people that the law protects. At the end of the day, this rule not only increases Americans’ access to fair and affordable housing, but also permits businesses and local governments to make valid policy choices.”
Fair housing advocates, like the National Low Income Housing Coalition, argue that the rule changes “dismantle an important enforcement tool for combatting discrimination, further restricting access to housing for people of color, seniors, people with disabilities, families with children, LGBTQ people, victims of domestic violence and others.”