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May 2010
Index of all
past
Affiliate Corner columns
New FHA rules for condo project approval
By Ann Abraham
Colorado State Bank and Trust
Here are some of the new rules you need to know to get your sellers and buyers ready for the new FHA Condo Project Approvals. Every current condo project approval (pre-HARP/DELAP) will fall off the FHA list Dec. 7, 2010.
Here are some of the major parts of the new requirements:
• Minimum number of units is two or more.
• Right of first refusal is permitted unless it violates discriminatory conduct under the Fair Housing Act.
• Commercial space cannot be more than 25 percent of the property’s total floor area in the project.
• Investor ownership cannot be more than ten percent of the units owned by one owner.
• Pre-sale at least 50 percent of the total units.
• Owner-occupancy ratio is 50 percent.
• Delinquent HOA dues cannot be more than 15 percent of the total units in arrears (more than 30 days past due).
• On new projects, FHA will not issue a new case number once 30 percent concentration level has been reached.
• Projects consisting of four or more units will have no more than 30 percent of the total units encumbered with FHA insurance.
• Condo conversions – the one-year waiting period requirement for conversions is eliminated.
Recertification of project approvals
Condo project approvals will expire two years from the date of placement on the list of approved condos. Further participation in the program after this two-year period has expired will require recertification to determine that the project is still in compliance with HUD’s owner-occupancy and that no conditions currently exist which would present an unacceptable risk to FHA.
Items that must be given consideration are:
• Pending special assessments
• Legal action against the HOA or its officers
• Adequate hazard, liability insurance and, if needed, flood insurance.
Spot approvals have expired and are no longer available.
Getting a condo project approved will be costly, so you will need to prepare your seller and/or buyers. Each project will vary. Please contact your lender for assistance. Full details can be found in Mortgagee Letter 2009-46 A&B. |
