FHA Condo Approval Specialist: Critical FHA Condo Approval Requirements to Sunset 8/31/14

Critical FHA Condo Approval Requirements to Sunset 8/31/14

Critical FHA Condo Approval Requirements to Sunset 8/31/14

eyemark_2_300pxUnless 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 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

eric.boucher@readysetloan.com
ready set loan condo team

 

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Comment balloon 26 commentsReadySetLoan Condo Approval Team • August 28 2014 08:44AM

Comments

Eric, last minute is the way of that world. I would not be surprised if they let it expire and then revive it.

Posted by Kathleen Daniels, San Jose Homes for Sale-Probate & Trust Specialist (KD Realty - 408.972.1822) over 3 years ago

Eric like Kathleen said "last minute is the way of the world", and with HUD if seems like the opporate on the same principle as my youngest son, why do something until you absolutely, positively have too :)

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 3 years ago

Yet, in many communities, things will go on as usual. 

I read those condo letters.  They can be very revealing.

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 3 years ago

Kathleen - I have no reason to suspect that they won't extend the effective date.  They are currently working on a comprehensive Handbook that will encompass everything to do with FHA and it sounded like they were going to leave these items alone.

Hi George - My younger guy is the same way.  He had to read a book over the summer and write up a report on it; it was due today.  He read the entire book Saturday to yesterday and completed the report at 2pm yesterday!  Ugh.

Hi Lenn - that is good that you read those Letters.  Most agents do not.

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) over 3 years ago

Eric

Thanks for the update.  And Yes, HUD or most Government entities wait until the last minute, or let things expire, only to revise or extend at a later time.

Go figure.

Posted by Wayne L. Brown (Broadview Mortgage) over 3 years ago

Well Eric.  They should because that's where pending litigation is disclosed. 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 3 years ago

Well, I'm a last-minute person too, but I prefer that the government be more proactive in some of these issues.

Posted by Margaret Goss, Chicago's North Shore & Winnetka Real Estate (Baird & Warner Real Estate) over 3 years ago

I think the unit owner delinquency rate is not a bad change.  Condos become non-warrantable when there are too many owners in the complex behind on HOA or mortgage payments.  

Posted by Kevin Mackessy, Dedicated. Qualified. Local. (Blue Olive Properties, LLC) over 3 years ago

Hi Wayne - as mentioned in a comment above, HUD is working on a comprehensive handbook.  I am curious to know if this is the reason behind the delay.

Hi Lenn - then I guess I am not following which letters you are talking about.

Hi Margaret - I also have a tendency to do things last-minute

Kevin - that is why I would expect the owner-delinquency rate to remain.  Incidentally, Fannie Mae says 15% can be 30 days delinquent with exceptions but absolutely no more than 15% 60 days late.

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) over 3 years ago

Eric

Thanks for sharing the FHA condo approval requirements that are sunseting on August 31, 2004.

Good luck and success.

Lou Ludwig

Posted by Lou Ludwig, Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC (Ludwig & Associates) over 3 years ago

We are seeing fewer and fewer condominium getting FHA approval in So. NH.  It is making it difficult for buyers to purchase a condominium if they are getting FHA financing... and more difficult for owners to find a buyer who is going to get a conventional loan.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) over 3 years ago

The delinquency rate can be a huge issue. It's good to know HUD will approve their own plan.

Posted by Pamela Seley, Residential Real Estate Agent serving SW RivCo CA (West Coast Realty Division) over 3 years ago

Eric, some of the things, looks like, are going to be better for borrowers - some relaxation in FHA guidelines.

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) over 3 years ago

FHA is very important to Crofton area home sales, so hopefully we experience any hiccups in this. In a previous similar situation, I did use the potential problem w/ FHA approval as motivation to accpet an contract offer before the existing legislation expired, so agents might turn this lemon into lemonade if the opportunity presents itself.

Posted by Margaret Woda, Maryland Real Estate & Military Relocation (Long & Foster Real Estate, Inc.) over 3 years ago

Eric, some of the things, looks like, are going to be better for borrowers - some relaxation in FHA guidelines. obat pembesar penis

Posted by stepa niisam over 3 years ago
Wouldn't let the sunset on those plentiful rooms and that backdrop. That might go for 200,000 more in my neck of the woods.
Posted by Laura Cerrano, Certified Feng Shui Expert, Speaker & Researcher (Feng Shui Manhattan Long Island) over 3 years ago

Maybe relaxing some of the guidelines would boost using the program here. It's not very common in swfl.

Posted by Chris Griffith, Bonita Springs Listing Agent (Downing-Frye Realty, Bonita Springs, FL) over 3 years ago

Good morning Eric. Well deserved feature. I'm not sure we should be surprised that decisions like this come down to the last minute or at all. It makes good sense for this to be extended.

Posted by Joe Petrowsky, Your Mortgage Consultant for Life (Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709) over 3 years ago

Thank you for reading Lou

Hi Joan, we have to continue to spread that message.  We have been fairly successful here in CT in gathering and sharing market data.  Numbers don't lie

Hi Pamela - we should see something in a few days

Hi Praful - hopefully this trend continues

That was a very proactive move Margaret to avoid a bad situation

Stepa - let's hope this continues

HI Laura - I like the photo as well

Chris - do you have a lot of non-resort (condotel) communities in Bonita?  I lived in Naples and there were a ton that were condotels.

Thank you Joe.  I have no reason to think that they won't be extended as HUD gave no indication that they wouldn't be.

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) over 3 years ago

Hi Eric.  Waiting to the last minute is so typical.

Posted by Conrad Allen, Webster, Ma, Realtor (Re/Max Professional Associates) over 3 years ago

Good Morning Eric: Your contribution in keeping us informed and in your pursuit to get more condos approved is invaluable. Keep it up buddy. Let us reach the 400K mark.

By the way, what is going to happen if they let it expire for a long time. What would be the repercussions?

Posted by Maria Gilda Racelis, Home Ownership is w/in Reach. We Make it Happen! (Home Buyers Realty, LLC-Manchester, Bolton. Vernon,Ellington) over 3 years ago

I just wish HUD would bring back the spot approval.  When you look at helping the housing market and specific buyers in specific areas, that's the way you do it.  But way too "common sense," I suppose.

Posted by Rob Spinosa, Executive Loan Advisor, Marin Mortgage Pro (Guaranteed Rate, Marin County, CA) over 3 years ago

Hi Conrad - at the risk of sounding like an FHA "brown noser", I know that they are working diligently on several items at the same time, including a comprehensive guide that encompassess everything FHA.

Hi Maria - if it expires, those items mentioned in the article will go away which will greatly impact certain types of projects, making it more difficult to get them approved.

Hi Rob - I wouldn't expect spot approvals any time soon.  An argument against spot approvals is if certain condominiums get a "pass" why not just throw out all of the regulations?

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) over 3 years ago

Your point is well taken--waiting till the last possible minute to extend is insane given how much of the real estate market could be impacted in many areas.

Posted by Nina Hollander, Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor (RE/MAX Executive | Charlotte, NC) over 3 years ago

Typical government m.o.  They'll likely extend in late September, and then make the extension retro-active to Aug 31.

Posted by Claude Labbe, Realty for Your Busy Life (Real Living | At Home) over 3 years ago

Hi Nina and Claude - FHA did extend the expiration of the ML12-18. I received an email at 5:21AM on 8/30 providing notification of this.  I'm going to write about it now.

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) over 3 years ago

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