There are major changes on the way for developers of condo projects and existing condo owners who want to get approved for FHA financing. These changes are set to take place October 1st, 2009. But the ramifications are going to start being felt right away. The details are outlined in the Mortgagee Letter 2009-19 that was issued on June 12th by HUD. In this latest Mortgagee Letter FHA is announcing dramatic changes to their Condo Approval Process and the ELIMINATION of the Spot Approval Process. While these changes reduce the documentation and requirements for Full Condo Approval, it will place a lot more work and responsibility on Lenders.
The Lender will have 2 options:
- HUD Review and Approval Process (HRAP).
- Direct Endorsement Lender Review and Approval Process (DELRAP), outlined in this Mortgagee Letter. This option is only available to lenders who have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects.
The processing options stated above will be applicable to condominium developments that are:
- Proposed/Under Construction;
- Existing Construction; or
- Conversions.
Certain types of projects will be ineligible. They are:
- Condominium Hotel or “Condotels
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Jim – What changes will this have on condominium communities currently involved in a lawsuit and for condominiums with the right of first refusal? We have a lot of projects here that have been established for decades that are getting shafted because they aren’t FHA approved due to right of first refusal. Have they stated whether the new approval process will be instantaneous or will this cause a massive backlog due to an influx of approval requests?
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Josh – Once a Condo Project has an unconditional Direct Endorsement by a Lender and is added to the FHA Approved Condo List, in most cases the “Right of First Refusal” will no longer be a reason for declining approval of a Condo Project. This is according to Brian Montgomery, Assistant Secretary for Housing, Federal Housing Commissioner. You need to check with the Feds to confirm the details of this because it is still being worked out.
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Jim, thanks for the update on this. Here in Vancouver condos are an important element to the housing mix, especially to both curb the sprawl that has taken place, and to enable some nice brownfield redevelopments, such as the one taking place on the Vancouver waterfront where the Boise Cascade paper-mill once stood. I hope our Washington State delegation is mindful of this. John
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FYI, here is the official website that has the list of FHA approved condos:
https://entp.hud.gov/idapp/html/condlook.cfm
Also, I heard that all of the currently approved condos (approved before 2008) will have to be re-certified before an FHA loan will be approved? If that is true the entire condo market will suffer serious set backs.
FYI, here is the official website that has the list of FHA approved condos:
https://entp.hud.gov/idapp/html/condlook.cfm
Also, I heard that all of the currently approved condos (approved before 2008) will have to be re-certified before an FHA loan will be approved? If that is true the entire condo market will suffer serious set backs.
Its true that existing condos will need FHA approval. No more “spot” approvals. In addition, all condos approved prior ot 10/08 will need recertification. I can help. Contact me at steve@condo-approval.com. Or by phone at (847)293-2962.
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Jim,
The new letter that was put out by HUD on 11/6/09 states that “projects that received approval prior to October 1, 2008, will require recertification on or before December 7, 2010.” Do these projects that were approved prior to 10/1/08 have a grace period of exactly one year from when the new guidelines become effective? In other words, are we to assume that these projects will be acceptable by FHA until 12/7/10? It doesn’t make sense considering that the intitial requirements for approval of these projects were different from the new requirements.
Jim,
The new letter that was put out by HUD on 11/6/09 states that “projects that received approval prior to October 1, 2008, will require recertification on or before December 7, 2010.” Do these projects that were approved prior to 10/1/08 have a grace period of exactly one year from when the new guidelines become effective? In other words, are we to assume that these projects will be acceptable by FHA until 12/7/10? It doesn’t make sense considering that the intitial requirements for approval of these projects were different from the new requirements.
Condos that were approved prior to 10/08 will need recertification prior to 12/2010 or they will fall off of the approved list. This means that they will then need to reapply for approval if they haven’t been recertified. In the case of these condos, FHA will require recertification prior to closing their next FHA loan. You will begin to see recertification required on the remarks section of the approval if you look it up on the HUD website. I can help those that need to get their condo recertified or even approved. My company, Condo Approval Professionals, specializes in this area.
Steve Stenger
President
E-mail: steve@condo-approval.com
Hey Steve, i’m an R.E. agent working w/a buyer interested in a condo that’s NOT FHA approved. How long is the time frame for a condo to become FHA approved? Hope you can HELP. Thanks, Rita McClain, agent 2440
Hi Rita!
Thanks for contacting me! I would be glad to assist. It takes about 3-4 weeks once submitted to FHA. Contact me at (847)293-2962 to discuss further.
Steve Stenger
President
Condo Approval Professionals LLC
Steve, thanks for your reply. The language in HUD’s letter is hardly explicit and leaves a lot of room for interpretation. However, your interpretation of the letter’s inent makes sense. Is there really a difference between recertification and reapplying?
Yes, recertification is a much smaller and easier process. Reapplying would require submission of the Declaration of Condominium Ownership and all of the other documents required for full project approval. I can help you with either process.
if a condo does not operate with an account of reserves to keep the maintenance payment low then is this condo not approved?
A condo must have a 10% reserve contribution in their budget. FHA doesn’t verify if the association has any money currently in their reserve account.
Kind regards,
Steve Stenger
President
Condo Approval Professionals LLC
(847)293-2962
E-mail: steve@condo-approval.com
Jim, it’s my understanding that today is the last day to have an FHA case # issued prior to this Mortgagee Letter going into effect (it was extended from when this post was originlly written).
Actually, the last day to get a case # to do an FHA spot was last Friday. From now on a condo association must be approved by FHA in order to offer FHA financing in that community. I can help you with this process. My company, Condo Approval Professionals LLC, specializes in this process.
Sincerely,
Steve Stenger
President
Condo Approval Professionals LLC
(847)293-2962
E-mail: steve@condo-approval.com
Actually, the last day to get a case # to do an FHA spot was last Friday. From now on a condo association must be approved by FHA in order to offer FHA financing in that community. I can help you with this process. My company, Condo Approval Professionals LLC, specializes in this process.
Sincerely,
Steve Stenger
President
Condo Approval Professionals LLC
(847)293-2962
E-mail: steve@condo-approval.com
Well, we are now in the era of no spot approvals. Let’s see how this all shakes out. The next shoe to drop is the increased mortgage insurance premium starting in April. I bet there will be some more government-inspired mandates coming as well.