FHA Condo Approval Specialist: Conventional Condo Loans Rejected for Comments on FHA’s Site

Conventional Condo Loans Rejected for Comments on FHA’s Site

Conventional Condo Loans Rejected by Lender for Comments on FHA’s Site

Recently, we were contacted by a property management company for assistance with an FHA condominium project approval.  The project had been submitted to and was rejected by FHA for three reasons.  Yesterday, the property manager informed us that conventional loans were now being rejected because of the comments on the FHA Approved Condominiums List.

The condominium was rejected for the following:

  1. Leasing restriction not in compliance;

  2. Balance sheet did not show a separate bank account for reserve funds; and

  3. No evidence provided for Fidelity/Crime policy for HOA or management company.

I won’t say much about #1 because the Fannie Mae Sellers Guide doesn’t make mention of condominium project ineligibility based on leasing restrictions.  It does, however, say that projects are ineligible if they “restrict the unit owner’s ability to occupy the unit”.

Fannie Mae, like FHA, require that condominium projects contribute 10% to a reserve account annually.  Reserve funds must be held in an account that is separate from the operating funds.  The balance sheet of this condominium did not reflect that this was occurring.  This not only rendered the project ineligible for FHA, but also for Fannie Mae.

Fannie Mae also requires condominium projects of more than 20 units to carry a Fidelity (or Crime/Employee Dishonesty) policy to protect against theft of monies of the association.  If the condominium employs a property manager, the policy must show that the manager is covered or that the manager has its own policy which protects the association’s funds.

The fact is that this condominium project does have a reserve account but it is not noted as such on the balance sheet.  All funds are lumped together in one line noted as “cash assets”.  The association also has a Crime policy but the original submitter did not know to include evidence of this coverage in the submission package.

We will work to clear items #2 and #3 up quickly.  The leasing restriction may take some time, especially if we need to file an amendment to the declaration. 

Real estate agents and mortgage loan originators would be well-served to check the FHA Approved Condominiums List before submitting an offer or providing a pre-approval letter for condominium purchases.  There could be notes on the FHA site that may prevent the buyer from obtaining a conventional mortgage.

Top Photo Credit: (c) Can Stock Photo / imphot

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 16 commentsReadySetLoan Condo Approval Team • November 19 2014 09:30AM

Comments

Eric, I would question the Property Managers assessment that it was the comments on the FHA Approved Condo List that created those issues.  On a Fannie Mae Loan Lenders need to have either a limited or full Condo Questionnaire filled out, and both items #2 & #3 would be questions on both those forms.   So it is more likely the Lender was made aware of those issues because of the Condo Questionnaire Form than by checking above and beyond the comments on the FHA Approved Condo List.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) almost 4 years ago

Good grief.  Either someone isn't doing their job or they don't KNOW their job.

 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) almost 4 years ago

great article thanks for posting. You would think that they would think all of this through and do it right the first time.

Posted by Jack O'Neal (Conway Real Estate) almost 4 years ago

I always find it interesting to think whether or not the people reject and comments have anything to hide or how big secrets might be.

Posted by Laura Cerrano, Certified Feng Shui Expert, Speaker & Researcher (Feng Shui Manhattan Long Island) almost 4 years ago

Eric, yes, it's a good practice to check the FHA approvals before writing the offer.

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) almost 4 years ago

Jack, if only it were that simple we would all be billionaires right now living on acres and acres of land. Be good, my friend.

Posted by Laura Cerrano, Certified Feng Shui Expert, Speaker & Researcher (Feng Shui Manhattan Long Island) almost 4 years ago

Checking approvals with great care is the thing to do, Praful. I'm sure you take great care in everything you do. Love and light to you!

Posted by Laura Cerrano, Certified Feng Shui Expert, Speaker & Researcher (Feng Shui Manhattan Long Island) almost 4 years ago

Good morning Eric. Well deserved featured post and this is such an important topic. We are currently running into all kinds of issues when getting mortgage on condos, some of the issues won't get fixed for a while.

Posted by Joe Petrowsky, Your Mortgage Consultant for Life (Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709) almost 4 years ago

Selling condos these days (whether as a buyer's or seller's agent) is fraught with all sorts of uncertainties. Many condos in our area are very low priced and sometimes one needs to wonder if the commission is worth all the work and stress.

Posted by Nina Hollander, Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor (Coldwell Banker Residential Brokerage | Charlotte, NC) almost 4 years ago

Hi Eric.  Another case of a moronic underwriter not knowing the facts.

Posted by Conrad Allen, Webster, Ma, Realtor (Re/Max Professional Associates) almost 4 years ago

It's always something, isn't it?!? We can't even imagine what someone is going to come up with next to interfere with our clients' sale or purchase.

Posted by Margaret Woda, Maryland Real Estate & Military Relocation (Long & Foster Real Estate, Inc.) almost 4 years ago

Eric~ I am so glad we can rely on you to tell it like it is! Condo financing is tricky unless buyers are working with a professional like you 

Posted by Jon Kolsky, Licensed California Real Estate Broker (Kolsky Realty & Management) almost 4 years ago

Condos are very hard to finance in our area as well.. I wish we could just sell them all cash! in a perfect world :)

Posted by Sheila Newton Team Anderson & Greenville SC, Selling the Upstate since 1989 (Berkshire Hathaway HomeServices - C. Dan Joyner) almost 4 years ago

Hi All - thank you for your comments!  I was unable to respond earlier from what I assume was an AR glitch.  Sorry for the delay.

Hi George Souto - the property manager was told by the loan officer that they did find it on the FHA site.  This is not to say that it wouldn't have been uncovered via the questionnaire...if it was accurately completed.

Thank you for reading, Lenn.

You would think so, Jack, but it is not always the case

Thank you for reading, Laura.

I agree Praful.  It is necessary in this day and age.

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) almost 4 years ago

Thank you Joe.  I hear stories like that all of the time.

Hi Nina Hollander - I guess that is a business choice for agents.  You don't want to be Nina the Condo Queen?

Hi Conrad - it takes all kinds.

Hi Margaret - no doubt that the government will find something to make it more difficult.

Thank you, Jon.  It's fun work

Hi Sheila - "...in a perfect world."  What fun would that be? 

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) almost 4 years ago

Hey Eric... I'm already Nina Hollander, the queen of real estate! Becoming condo queen would be redundant and maybe showing off!

Posted by Nina Hollander, Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor (Coldwell Banker Residential Brokerage | Charlotte, NC) almost 4 years ago

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