FHA Condo Approval Specialist: FHA Condo Approvals - Mortgagee Letter ML 2011-22

FHA Condo Approvals - Mortgagee Letter ML 2011-22

FHA Condo Approvals – Mortgagee Letter ML 2011-22

Recently, HUD released Mortgagee Letter ML11-22 in which it further clarified and modified the guidelines by which it approves condominium projects. Although condominium projects now have to jump through more hoops in order to get approved with HUD, the clarification of the required documents should make the process easier to go through.

The majority of the changes apply primarily to Pending, Under-construction and recently-converted (less than two years old) Conversion projects, including further defining the difference between a gut-rehab Conversion and a non-gut Conversion.

Phase 1 Environmental Assessment

One of the biggest modifications is HUD now requires all Pending, Under-construction and gut-rehab Conversions to obtain a Phase 1 Environmental Assessment report. HUD didn’t previously require this unless it was known that the site had the potential to be contaminated. Now all new projects are required to obtain a Phase 1.

Budget Line Item 10% Contribution to Reserve Account

Another change deals with the documentation that is required for HUD to review the financial stability of a project. Previously, HUD had not required a line item in the budget which transferred 10% of the annual budget to a reserve account if the reserve account was sufficient. This was left up to the discretion of the project reviewer. Now, the budget must contain this line item or HUD requires the project to complete a Reserve Study by a third party engineering firm in order to determine that the reserve account is sufficient.

Site Condominiums

HUD clarified what a site condo is, what the requirements are for a cooperative to condominium Conversion, for vertical phasing of a project, for Affordable Housing and Deed restrictions. It also determined that an investor who also resides in the project can omit his/her owner-occupied unit from the 10% calculation. This means that technically an investor can own more than 10% of the units provided that he/she lives in one of them. This is especially beneficial for smaller complexes where owner-occupants also own rental units in the project.

True Copies of Recorded Legal Documents

HUD also now requires true copies of all recorded legal documentation, such as the plat maps, building plans, declaration, by-laws and any amendments. Previously, so long as copies were provided, the volumes and page numbers were noted and the documents were signed, this was acceptable. This is of particular importance especially when considering the cost of getting a project approved or recertified. I have seen several projects with more than 10 legal phases, all of which have their own amendments to the original declaration. In these cases, hundreds of pages would need to be obtained from the town hall at a typical cost of $1 per page.


In all, this mortgagee letter is of great benefit to those projects looking to obtain HUD’s approval or to get recertified. Prior to this letter, there were many guidelines that were left to the project reviewer’s discretion. This made processing submissions trickier as some reviewers requested items that were very difficult to obtain and delayed the processing of the files. These clarifications should streamline the process and may even decrease HUD's time to process each submission.

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 askeric@readysetloan.com 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

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Comment balloon 3 commentsReadySetLoan Condo Approval Team • July 26 2011 02:43PM


Great post. This is information everyone needs to know if they are interested in the condo market.

Posted by John Saari, "The Mortgage Buddy" over 7 years ago

All very good information Eric.  It can be very frustrating when a association is not approved and you have to explain it to the buyers.

Posted by Bill Somerset, ABR, e-PRO - Realtor - NH Real Estate Agent (Re/Max Realty Group) over 7 years ago

Thank you for the comments guys.  Yes, Bill, it can be very frustrating considering there are few other financing options for condominiums.

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) over 7 years ago