US housing regulator considers short-term rental lending measures

US: The main US housing regulator is calling for input on how to safeguard against potential lending risks associated with residential buildings filled with short-term rental units.

The Federal Housing Finance Agency (FHFA), run by director Mark Calabria (see pic) is requesting public comment on questions related to mortgages in developments where a large proportion of units are rented for 30 days or less or are primarily used as vacation homes.

The FHFA said condo, co-op, and planned unit developments used mainly for vacation rentals have characteristics commonly associated with hotels or resorts.

It said lenders Fannie Mae and Freddie Macโ€™s policies are not designed to manage the range of risks at a single project. “Many sellers do not have the expertise to complete the underwriting required to manage risks that are commonly addressed through commercial insurance underwriting and appraisal practices,โ€ it said.

The regulator also asked for comment on questions including:
โ€ข Whether property appraisals should change to reflect the complexity around short-term rentals.
โ€ข How sellers can prevent occupancy fraud on mortgages for units used for short-term rentals if the borrower claims itโ€™s a primary or second home.
โ€ข What data show for the performance of mortgages in projects with many short-term rentals versus lending secured by primary residences, second homes, and investment properties with long-term leases.
โ€ข What additional documentation is needed to determine risk for projects mainly made up of second homes and investment properties.

Interested parties are being given until July 5 to submit input.

 

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