FHA Condo Approvals – Investor Ownership
Investor ownership concentration in a condominium project can be a determining factor if the project wants to become approved with FHA. I get many phone calls regarding this particular guidance.
The minimum owner-occupancy concentration in a project is 50% making the maximum investor concentration 50%. This used to be 51%/49%, respectively, but Mortgagee Letter 12-18 (ML12-18) made this temporary change until 8/31/2014. It is expected that the new processing handbook (with an expected release early next year) will make this permanent.
The 10% Rule is Now the 50% Rule
For all existing or non-gut rehabilitation projects, any investor/entity may own up to 50% of the total units in the project. This is true if at least 50% of the total units have conveyed to owner-occupants or are under bona fide contract for purchase to owner-occupant purchasers.
FHA had placed a restriction that no one investor/entity may own more than 10% of the units within a project. ML12-18 increased this to 50% and it is expected that this will be made permanent next year.
As an aside, Fannie Mae, Freddie Mac and the VA all held this ratio to 10%.
Investor Owner-Occupied Units
If an investor owns multiple units in a condominium project and lives in one of them, the unit in which he/she resides is considered owner-occupied. When calculating the percentage owned by this investor, this unit should not be included in the calculation.
Unoccupied/Unsold Units Owned by the Builder/Developer
Unoccupied and unsold units owned by the builder/developer are not considered investor-owned and are therefore exempt from the 50% requirement unless the unit is or was previously rented or occupied (regardless if money was charged to the inhabitant.)
Non-Profit//Government Housing Programs
Eligible non-profit and governmental housing programs are subject to the same investor and owner-occupied percentage requirements as noted above.
Prior to ML12-18, non-profits and government housing programs were exempt from the restriction so long as the housing programs met the guidelines to do so.
Image courtesy of ponsulok/freedigitalphotos.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!