WORLD PROPERTY CHANNEL ®

I don't know about you, but I have been following closely the shenanigans that have been going on for the past 18 months at  451 7th Street S.W. in Washington, DC 20410

That's the address of the Federal Housing Administration which is part of the U.S. Department of Housing and Urban Development.

Controversy upon controversy has flowed from this location. The latest involves new FHA rules that kicked in Oct. 1.

Almost everybody that I know of is screaming bloody murder at those rules.  They include real estate agents, brokers, lenders, service providers, lawyers, title insurance executives and investors, of course.

Here are only a few of the new headache-triggering rules:

• The FHA will not insure lenders' loans on condo units in projects that include more than 25 percent commercial space.

• No single investor, including the developer, may own more than 10 percent of the units in any specific project.

• The FHA prohibits lenders from making loans in condo developments that are not "primarily residential."

That last rule alone could mean the FHA will not insure loans made on condos in mixed-use projects.

I asked my old friend Moishe Pipuk his thoughts on the new rules.

"A disaster waiting to happen," Pipuk quickly replies. "Owner-occupants in half-empty condo buildings are now practically doomed to foreclosure."

Michael 'Mish' Shedlock

Another market observer, financial-news blogger Michael 'Mish' Shedlock, who also is a registered investment advisor representative for Sitka Pacific Capital Management of  Sonoma, CA, notes, "It's going to be difficult to buy into buildings with less than 70 percent occupancy." 

Unless it's an all-cash  transaction, of course.

Industry trade groups and professionals are also upset at another FHA-HUD rule.  It's called the Real Estate Settlement Procedures Act, or RESPA.  That rule begins Jan. 1, 2010.

On its face, the rule sounds simple. HUD is requiring that loan originators provide borrowers with a standard Good Faith Estimate that clearly discloses key loan terms and closing costs and that closing agents provide borrowers with a new HUD-1 settlement statement.

HUD says RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services.

David H. Stevens

The Mortgage Bankers Association, a Washington lobbying group that says it has 2,400 corporate members, recently wrote FHA Commissioner David H. Stevens, criticizing the rule and demanding that it be put off for an indefinite period.

The MBA members say they need more time to print up new forms and to spread the word among their colleagues.

"Hud's guidance has come far too late in the process and has been inadequate and often contradictory," the MBA wrote.  Robert E. Story Jr. is the current MBA chairman.

Sheer nonsense, I say.

By the way, the MBA reported a deficit of $8.6 million in fiscal 2088, according to the trade group's federal tax filings.

David H. Stevens, FHA's current commissioner, also called  MBA's comment nonsense in his reply to the Washington, DC trade group, but he didn't use those exact terms. He told the bankers group the final RESPA rule was published Nov. 17, 2008 -- 14 months ago.

Robert E. Story Jr.

Where were the critics at that time,  Stevens asks politely.

The banking and real estate industries are also upset over still another rule associated with the FHA and HUD.  On Oct. 10 of this year, the Federal Reserve made changes in the Federal Truth and Lending Act.  The changes are supposed to protect homebuyers from unfair and deceptive sales practices.

But Bruce McClary, a spokesman at Baltimore, MD-based ClearPoint Credit Counseling Solutions, has been widely quoted as saying the revised act results in lenders "examining buyers' credit under a microscope."

So what's wrong with that, I ask.

McClary states "these more stringent lending standards, combined with the expiration of the first-time homebuyer tax credit on Nov. 30, will undoubtedly create even more obstacles for homebuyers, resulting in a significant drop in home sales."

Horsefeathers. 

I say single-family and condo sales will continue to grow in the coming months for one big reason:  Price.  Prices are continuing to drop in most markets, even as national surveys maintain they are leveling out in some areas.

Where the new buyers will find money for the down payments, or even come up with all-cash offers, is a subject for another column.

(Please see related column, Alex's View of the World, Oct. 23, 2009.)

And that's the way I see it - for now. 

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