Please read the following changes to FHA condominiums. HUD maybe extending this date again but it is for sure that they will be making large changes to their condo financing.

Are you a MN condo seller? Please call me with any questions. Your business is always appreciated.

FHA financing on MN Condo Projects is about to go from flood to trickle on October 1, 2009. Now extended to November 2, 2009

These new guidelines announced in Mortgagee Letter 2009-19 will apply at that time:

The spot approval process for condominium projects is eliminated.

All current condominium project approvals will be invalid (with the exception of projects approved on or after October 1, 2008) and projects must be re-approved under the new options available. Going forward, all projects will require recertification every two years.

There will be 2 approval process options:

HUD Review and Approval Process (HRAP)
Direct Endorsement Lender Review and Approval Process (DELRAP)

(This option is available only to lenders who have unconditional Direct Endorsement authority and staff experienced in reviewing and approving projects.)

HUD will only accept approval packages for review from

- Lenders or
- Builders/Developers.

Getting projects back on the approved list will be a long and slow process. And until a project is approved, FHA financing is not an option. Early submission to beat the October rush is not allowed.

Now is the time to get those condo listings sold and your condo buyers off the fence!

Project Eligibility Requirements

Projects consist of two units or more.
Projects must be covered by hazard and liability insurance, and flood insurance if applicable.
Right of first refusal is permitted unless it violates discriminatory conduct under the Fair Housing Act.
No more than 25% of property’s total floor area can be used for commercial purposes. Commercial portion must be free of adverse conditions to occupants.
One investor may own no more than 10% of units. This applies to developers/builders that rent vacant and unsold units. For two and three unit projects, no single entity may own more than one unit; all units and common areas must be 100% complete; and only one unit can be conveyed to non-owner occupants.
No more than 15 % of total units can be in arrears (more than 30 days past due) of their condominium association fee payment.
At least 50% of the total units must be sold prior to endorsement of any mortgage on a unit. Valid presales include an executed sales agreement and evidence lender is willing to make the loan.
At least 50% of the units must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction or projects still in their initial marketing phase, FHA will allow a minimum owner occupancy amount equal to 50% of the number of presold units (the minimum presales requirement of 50% still applies).
Legal Phasing is permitted for condominium processing. It is recommended that developers submit all known phases for initial project approval. For purposes of calculating the owner-occupancy percentage:
- On multi-phased projects the owner-occupancy percentage is calculated on the first declared phase and cumulatively on subsequent phases if the ownership of the project remains the same;
- If multi-phasing includes separate ownership per phase, each phase is calculated individually; or
- Single-phase condominium project approval requests must meet the owner-occupancy percentage requirement.
- FHA Concentration
  - Projects of three or less units will have no more than one FHA insured unit.
  - Projects of four or more units will have no more than 30% of total units insured by FHA.
- A current reserve study must be performed to assure that adequate funds are available for the funding of capital expenditures and maintenance. A current study must be no more than 12 months old – if recent events or market conditions have affected the finished condition of the property that information must be included. When reviewing the study, consideration must be given to items that have been replaced after the time that the reserve study was completed.