After Brexit, more exciting news and developments are coming to homebuyers as the senate passes the Housing Opportunity Through Modernization Act. Once it becomes law, HOTMA will open ample opportunities for low-to-moderate-income homebuyers who would like to initiate their journey to homeownership.
The senate approved the bill on Thursday, July 15 by unanimous consent, a few months after its remarkable house passage of 420 (in favor) to 0 last February. HOTMA was rolled out by the bipartisan cooperation of original sponsors Reps. Blaine Luetkemeyer, R-Mo., and Emanuel Cleaver, D-Mo.
While waiting for its formal presidential mandate, many are asking: “How will HOTMA impact the current FHA condo loan program as well as the Rural Housing Service Loan program, which are the targets of its reforms?”
In its Passed House amended summary version which you can find and read for yourself in the congress.govonline transparency portal, the legislation cites multiple benefits that could substantially lift the burden off the shoulders of low-to-moderate-income homebuyers.
HOTMA relaxes the current owner occupancy requirement from 50 percent to 35 percent and requires the FHA to replace existing policy on transfer fees with the less restrictive model already in place at the Federal Housing Finance Agency.
It also streamlines the process for exemptions to FHA’s rule that requires condominium projects to appropriate no more than 25 percent of its space for commercial use.
A significant improvement in FHA’s recertification process is also written. Furthermore, HOTMA allows housing agencies to use project-based vouchers for individuals and families who may be homeless and offer support for communities that seek to make needed repairs to aging public housing stock.
Meanwhile, it would authorize the Agriculture Department to use direct endorsement lenders to approve RHS-guaranteed loans. In the current set-up, lenders send their for-approval loan documents to Washington.
The National Association of Realtors (NAR), America’s biggest trade association, lauds the progress as they have been pushing for reforms in FHA’s condo program for the past several years.
NAR President Tom Salomone believes “overly-burdensome restrictions on condo financing” have long presented road-blocks to first-time and low-to-moderate income homebuyers who could have afforded that option.
“This legislation meets those restrictions head on, putting the dream of homeownership back in reach for more Americans,” Salomone says.
According to a recent Freddie Mac survey, about 19 million Baby Boomers want to buy a home, an 8 million chunk of which want to do it within the next four years. However, Millennials don’t seem to share the enthusiasm. About half of the 19 million surveyed said they are looking to pay less. This legislation change might give them the option they need, along with many others competing for affordable housing.
The bill is now passed to the White House and awaits Pres. Obama’s signature.
Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.
