New FHA Condo Guidelines:
The Life Raft for 2010
(November 2009)
FHA has announced new clarified guidelines (Mortgagee Letters 46A & 46B) for condominium project approval and recertification and has provided a transition strategy that will help keep the condominium market moving for another year. Here’s what you need to know:
§ All currently approved condo projects will remain on the FHA approved list.
§ Projects approved prior to October 1, 2008 will require recertification by December 7, 2010.
§ Projects approved after October 1, 2008 will require recertification 2 years from the initial approval date.
HOWEVER, this life raft has a few holes:
§ Spot loans are eliminated on case numbers on or after February 1, 2010
§ Lenders must certify on every loan file that currently approved projects continue to comply with the following or project is ineligible for FHA lending:
· Investor Ownership: One investor may own no more than 10% of units.
· Delinquent HOA Dues: No more than 15 % of total units can be in arrears (more than 30 days past due) of their condominium association fee payment.
· Owner-Occ Ratios: At least 50% of the units must be owner-occupied.
· FHA Concentration: 50% of units may be FHA financed with allowance to 100% (except for new construction and conversions) when:
o Previous 3 criteria above are met.
o Project completed > one year and all units are sold.
o HOA is controlled by owners
o Project budget shows 10% capital reserves.
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