What is an FHA “Spot Loan” and Why Can’t I Get One?
FHA Spot Loans were mortgage loans that were allowed in condominium projects that were not on HUD’s approved condominiums list. The lender had the ability to approve a single loan on a condominium unit in a project that was not approved by HUD without the whole project having to get approved. Spot loans are no longer available.
Throughout the year, HUD updates guidelines to its housing programs by means of Mortgagee Letters. In November 2009, HUD released Mortgagee Letter 09-46b which detailed the changes that were being made regarding the approvals of condominium projects.
For starters, spot approvals were to be eliminated. This meant that in order for units in a condominium project to be eligible for FHA-insured financing, the project itself must be on HUD's approved condo list. This change occurred on 2/1/2010.
Another major change that occurred is that all approved projects would be required to be recertified every two years. This was to verify that the project dynamics haven't changed to the point where it now poses a risk to HUD.
Some projects were initially approved back in the 1970's and HUD never again inquired as to the project's qualifications to maintain its approval!
Why is HUD doing this?
The FHA program was originally designed to handle around 10-15% of the total mortgage loan production in the country. Today, its market share is close to 40%. Anyone with any business sense knows that if you are doing 3-4 times the business that you anticipated small errors can end up leading to tremendous losses.
This led to HUD revisiting its condo project approval process and began implementing the recertification process to help mitigate the potential for losses.
If you want to know how to check if your condo is approved with HUD, you can look here.
Image courtesy of Danilo Rizzuti/freedigitalimages.net
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!