FHA Condo Approvals – Transient Leasing Form Extension
Yesterday evening, HUD released an email newsletter providing a couple of updates to its policies. The one that affects FHA Condo Project Approvals is the extension of the implementation of the Borrower’s Contract with Respect to Hotel and Transient Use of Property.
On July 19, 2013, HUD posted FHA INFO #13-42 which stated that FHA would require all borrowers to execute form HUD-92561 at the closing of an FHA-insured loan for condominium units in certain condominium projects. This requirement proved to be difficult to implement. FHA writes:
“Based on feedback received from our industry partners regarding challenges complying with this requirement immediately, FHA has determined that it is appropriate to extend the implementation date.”
FHA will announce the implementation date in a future Mortgagee Letter to allow for sufficient time for compliance by lenders. This extension will also allow time for FHA to review the requirement of this form and make any changes it deems necessary.
FHA INFO #13-42 made this form a requirement for condominium projects whose legal governing documents allow for the leasing of a unit for a period of less than 30 days. HUD determined that this could open the door for transient leasing or hotel use of the condo units, which is prohibited under the guidelines of the National Housing Act.
Form HUD-92561 is the same form that is required when a borrower purchases a multi-family home (2-4 units). It is a contract signed between the borrower(s) and the Secretary of HUD which states that as long as mortgage insurance is outstanding, no portion of the housing shall be used for hotel or transient purposes.
“Hotel and transient purposes” means a rental for a period of less than 30 days or the occupants are provided accommodations similar to that of a hotel such as desk service, room service, laundry, maid service, etc.
On the condominium project approval level, it is still required that a member of the Board of Directors of the condominium’s Homeowner’s Association sign an affidavit certifying that he/she has no knowledge of any units in the project that are being used for hotel or transient purposes. This affirmation must be submitted along with the project approval application if leasing is allowed within the project for a period of less than 30 days.
HUD’s stance is that if the condominium project’s legal documents are silent with reference to a minimum leasing period, then this does not apply. However, if the legal documents state a minimum lease term of less than 30 days, these requirements must be met.
When the project meets these requirements and is entered into the Approved Condominium List, the following statement must be entered into the system:
“The HOA Board provided a statement affirming that there are no units within the project currently rented for less than 30 days and/or pursuant to the lessor providing hotel-like services. The loan file submitted for endorsement must contain the required FHA Originating Lender statement. This statement must be included in all condominium files submitted for endorsement, including condominium loans insured under Lender Insurance authority. Reference FHA INFO #13-42 dated 7/18/13.”
The newsletter also announced Mortgagee Letter 2013-41: Lender Self-Reporting Requirements. This ML clarifies guidance to Single Family FHA-approved lenders regarding the self-reporting requirements.
In addition, it contained the announcement of Mortgagee Letter 2013-42 Extension of Annual Recertification Filing Deadline for Title I and Title II Lenders and Mortgagees with a December 31, 2013 Fiscal Year End. It notifies Title I and Title II lenders with a 12/31/13 FYE that an extension has been granted of 30 days after the deployment of the LEAP recertification functionality.
Both Mortgagee Letters can be found here.
Image courtesy of Stuart Miles/freedigitalphotos.net
Hotel Image courtesy of Salvatore Vuono/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!