Critical FHA Condo Approval Requirements to Sunset 8/31/14
Unless FHA releases a new Mortgagee Letter in the next few days, the temporary guidelines for condominium approvals created in Mortgagee Letter 12-18 will expire on August 31, 2014.
The highlights of the 12-page document include:
- Clarification of Under Construction,
- Approval Guidance for New Conversions,
- Requirements for Non-Residential/Commercial Space,
- Insurance requirements for Crime Policies,
- Modification of criteria for delinquency rate of unit owners,
- Updated Pre-Sale Requirements for new construction,
- Updated Owner-Occupancy Requirements for new construction,
- Investor ownership, and
- Modification of the Project Certification form (Appendix A)
For ordinary, existing condominium projects, the most important of these are the sections regarding investor ownership and unit owner delinquency rate.
Investor ownership. The temporary guidance allowed one entity to own up to 50% of the units in a condominium. Previously, one entity could not own more than 10% of the units. It also allowed for unoccupied and unsold units to not be considered as investor-owned units.
These changes made obtaining an FHA approval easier for new construction and conversions where the developer still owned a large percentage of units.
Unit Owner Delinquency Rate is now based on the 60-days instead of the 30-days. Initially, FHA had said no more than 15% of the unit owners could be 30 days or more delinquent with exceptions. This was changed to no more than 15% could be 60 days or more delinquent with no exceptions.
Many associations with whom we have worked were able to get approved solely based on this change.
HUD is expected to extend the effective date of this Mortgagee Letter. When I attended the HUD Roundtable session in Washington DC in March, HUD gave no indication that it had any intention of allowing this temporary guidance to come to an end.
...But talk about waiting to the last minute!
(c) Can Stock Photo / EyeMark
The Condominium Project Approval Team at ReadySetLoan is dedicated to helping condominium projects across the nation to obtain their approvals with FHA and the VA or become recertified with FHA. We have assisted nearly 200 condominiums and we can help your association.
ReadySetLoan is an active member of the Connecticut and New England chapters of the Community Associations Institute (CAI) and is a frequent contributor to Common Interest Magazine as an expert in FHA/VA condominium project approvals.
Please contact us with any questions regarding FHA or VA condominium project approvals. You can email me at firstname.lastname@example.org or call me at 404-433-4565. I will be happy to answer any of your questions.
FHA/VA Condo Approval Specialist
404-433-4565 Cell Phone
860-644-3772 Fax Phone
Check out our article in Common Interest magazine on page 19!