Eric Boucher - The FHA Condo Approval Guy's Blog

FHA Condo Approvals – PUD/Condo Project…What?!

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Mon, 13 May 2013 06:03:24 -0700

FHA Condo Approvals – PUD/Condo Project…What?!

During my time helping condominium projects to get approved with HUD, I run into many different types of projects…

…but this one left me scratching my head.

In the State of Connecticut, there used to be a form of common interest ownership called a Planned Urban Development – or PUD, for short – whereby the free-standing, single-ownership homes were units in an associated project. The unit owners own the interior and exterior of the units and are responsible for the insurance and maintenance of both. They own the land upon which the unit sits and commonly owned the front yard and back yard and were responsible for the insurance and maintenance of it as well.

[These projects still do exist but the state does not allow new projects to be developed with this form of ownership - they must be declared as condominiums.]

The common areas are maintained and insured by the Association and all of the unit owners own a fractional share of these areas.

I think that we all know what a condominium project is and many of us know what a “site” condominium project is. Site condominiums are very much like PUD’s except that they exist as two separate types of legal ownership in Connecticut.

HUD used to maintain an approval list for PUD’s but decided it was unnecessary in 2004. Therefore, FHA financing is available to all PUD’s without PUD projects having to be on an approval list.

HUD maintains an approval list for condominiums, but not site condominiums. As such, FHA financing is not available to units in a condominium project without the project first being approved with HUD. Site condominium projects do not need HUD project approval for FHA financing to be available.

Still with me?

Yesterday, I met with the Board President of an association in Connecticut and a lovely couple who is looking to obtain a reverse mortgage with FHA. Because the project is not approved, they are unable to currently obtain their reverse mortgage. In speaking with the husband, he initially told me that the project is made up of both attached and detached condominium units. If this is the case, the project must get approved with HUD before FHA loans are available.

The Board President, Joe, clarified that the project is in two legal phases: the first of which is comprised of free-standing units with a PUD Declaration and the second phase had its own Declaration of condominium ownership and contained both attached and detached units. They operate as one legal entity with one Association and under one set of By-laws.

Jackpot! We pretty much just hit all three: condo, PUD, site condo. But, wait! It gets better…

The PUD unit owners and the detached condominium unit owners are not responsible for the exterior of their units; they are maintained by the association.

The PUD unit owners own the land around their units but the Association mows their lawn. PUD unit owners are responsible for the exterior improvements made on their land which include patios, porches, decks and even swimming pools.

So, the question is: what the heck do we do with this?

The PUD units are not eligible for FHA financing because the project also contains condominium units. However, is the project approvable with HUD since it contains PUD units?

So I called HUD and spoke with a very intelligent gentleman who gave us good news. He said that from what he can tell from our basic description (granted, he hasn’t read the legal documents) the project should be approvable so long as the Declarations are fair to everyone and adhere to state law.

An example of being “unfair” would be if the PUD unit owners had greater access to amenities or the condominium unit owners bore more of the burden of the expenses of the project.

With that news, the topic of HUD condominium approval will be brought up at their next Association meeting. A sizeable portion of the Association consists of those of retirement age so I am optimistic for the couple’s sake that this measure will be approved. I wish them “good luck”!

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

7 Things You Type That Make You Look Stupid

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Fri, 05 Apr 2013 09:58:55 -0700

7 Things You Type That Make You Look Stupid

Before I go into my rant, I want to clarify that although I may be analytical, I am not a grammar/spelling nazi. There are certain words and spellings of words that have transitioned over from texting into emails and I have received emails from people – sometimes even regarding business – that have used some of these.

The purpose of this article is to completely make fun of the people who use these pseudo-words so that they may become aware of how dumb it makes them look.

Background:

Before smart phones, flip phones and slide phones with full keyboards, we used to text using the number pad. If any of you have gone from a phone with a full keyboard back to a number pad, even for a short time, then you will agree that it makes texting excruciating.

Unless, of course, you know what T9 is. If you don’t and your phone does not have a full keyboard (*chuckling*) then you should check it out.

[Personal historic note: Back in the mid-1990’s, I worked for a landscaper who used to send “text” messages using numbers to his buddy’s pager and vice-versa. I know some people are wondering what a pager is but think of the talent that it took to convert those numbers into words while riding on a lawn mower!]

I never paid for or used text messaging until I got my Palm Treo in 2005 so I didn’t see a reason to use these words. Even when my iPhone was stolen in 2011 and I replaced it with a phone without a keyboard, I typed out the words using T9.

Top 7 Things You Type That Make You Look Stupid:

#7: U, 2, Thru, Ur.

I lumped all of these together because they are pretty much all the same in my book. I completely understand their use in texting situations but there is absolutely no reason for them in emails. Out of the 4 mentioned, you only save a maximum of 3 keystrokes.

“2” is just absurd to me because of the phones that I have, it is actually more work to type the number “2” than it is to type “to”.

“Ur” should really be one on its own because it is often used for both “your” and “you’re” demonstrating that you don’t know what the difference is.

#6: Shud.

Ok, ok. Granted you are saving time by eliminating two whole letters (I’ll give you 5 points if you know what those letters are) but at what cost? If this is in a text message to a good friend, then it’s no big deal. If this is in a text message to a client, this would be a huge RED FLAG for me. If you type this in an email, please have someone tie your shoes for you so you don’t trip and fall down.

#5: Suntin.

I don’t really think I need to say much about this. Anyone who would type this in an email better be from South Central Los Angeles.

#4: Cause.

No, not the word “cause” but a shortened version of “because”. Again, with a keyboard there is no excuse for this. I also enjoy when someone writes ‘cause because it saves so many keystrokes to use the apostrophe instead of just typing the whole word. Might I suggest “bcuz” if you are in that much need of saving time?

#3: Thot.

Someone wrote this to me in an email recently and I was floored. Either the person thinks this is how it’s really spelled, was trying to save time or simply can’t type. It made me think of comedian Mitch Hedberg who said “If I were missing 9 fingers, I wouldn’t type any slower.”

In any case, didn’t the person’s Spelling Tool in her email client pick it up? I would have to assume that she may have added it to the system’s dictionary so that little red, squiggly line didn’t show up underneath it. That red line is annoying.

And I don’t think that saving 3 letters will do anything to prevent carpal tunnel syndrome. Just spell the word or don’t speak in the past tense.

#2: Nite.

Obviously, back in the day before keyboards on phones, the person would have to type the number “4” key three times in a row. Yes, our society is so reliant on instant gratification, we can’t seem to wait the 1.7 seconds that it takes before the curser could move to the next space so that we can press “4” again. And then another 1.7 seconds so that we can press “4” again. I mean, who has that kind of time?

In this day and age, I make a strong assumption that everyone has a keyboard or is at least aware of T9. When my iPhone was stolen a couple of years ago, I picked up an $11 flip phone. It didn’t have a headphone jack or a camera, but it did have T9. You have no excuse.

I am consistently receiving emails with this spelling that I am convinced that the person really does not know how to spell “night”.

#1: Prolly.

The moment someone types this to me, I cease taking him/her seriously.

Again, I get the rationale for the spelling since you would have to hit the “2” key 3 times in a row to spell “probably” which takes valuable time away from playing Words with Friends.

On this same line of thought, “Prolly” contains 2 L’s so you still have to wait the 1.7 seconds so you can type the second L. What are you really saving, then?

If you are short on time and wish to shorten the word, might I suggest typing “prob”? I’m pretty sure that if you were able to figure out what “prob” means, the recipient would understand. And it uses fewer letters than the full word and is even shorter than Prolly.

If you use Prolly and have a keyboard on your phone or you are typing it in an email, I would assume that someone is required to cut your food for you.

Lastly, if you say “prolly” in conversation, then someone is probably reading this to you but you are too busy looking at shiny things.

The caveat is that this is highly dependent upon the recipient. If ur used 2 talking 2 ur friends in text speak, then ur prolly gonna be OK. Your friends already know that you’re a moron. But if you are sending an email to someone with whom you are less familiar, then you’re letting out that little secret.

[I want to thank my ex-wife for providing me with the examples contained herein.]

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approval Specialists – Update on Non-Residential Space

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Fri, 16 Nov 2012 11:53:07 -0800

FHA Condo Approval Specialists – Update on Non-Residential Space

In Mortgagee Letter 2012-18, HUD issued new guidance for condominium processing and approvals regarding a number of criteria.

One such modification pertains to non-residential (commercial) space located within a condominium project. HUD is not opposed to having such space in a condominium but limit how much space can be utilized for this purpose.

Previously, HUD had limited non-residential space to 25%. This space must also be in a manner that is homogenous with residential use and be free of adverse conditions to the occupants of the other units.

Exception for up to 35% commercial space

The new guidance allows for exceptions of up to 35% non-residential space on a case-by-case basis. However, this does not waive the requirement that the space must be used in a nature that is homogenous with residential use and free of adverse conditions to the occupants of the other units.

The following requirements apply:

· Exceptions must be submitted with the submission package and must be sent to HUD for HRAP. Exceptions cannot be processed via DELRAP.

· Project must be complete for at least one full year. Proposed, under construction and newly converted projects are not eligible.

· Voting control has been transferred to the unit owners.

· Exceptions may be considered for Mixed-Use Developments.

Exception for Mixed-Use Developments

HUD also created a means whereby requests for exceptions to the 25 and/or 35 percent requirement for Mixed-Use Developments. These exceptions must be sent to the Philadelphia Home Ownership Center (HOC) to be reviewed via HRAP. There is no DELRAP processing option.

Mixed-Use Developments are defined as those which have a combination of any of the following: commercial, residential, retail, office or parking space.

Being granted an exception does not waive the requirement that the non-residential space must be homogenous and free of adverse conditions to the occupants of the other units.

There are certain additional requirements needed for the submission package that include:

· Cover letter requesting the exception that include reasons for the request for the exception, description of all of the uses in the project and breakdown of the uses by building and floor area and the commercial space percentage.

· Explanation of how the percentages were calculated – calculations included.

· Market analysis, including neighborhood analysis.

· Photographs of project and surrounding neighborhood.

· Spreadsheet that contains non-residential leased space information.

· Must be Mixed-Use projects ONLY.

· Commercial space must not have a negative impact on the residential character of the project.

· Commercial space may not exceed 50% of the floor area unless specifically approved by the Commissioner or his/her designee.

The requirements for Live/Work Projects remain the same as in ML 11-22.

As in the past, HUD has been working to modify the guidance for condominium approval. In speaking with those at HUD, their goal is to provide a common-sense approach to the approval process.

These modifications make good sense in that so long as the project has a “residential feel” to them, why would a slight commercial aspect have a negative impact on the property values?

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approval Specialists – Update on Investor Ownership

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Wed, 14 Nov 2012 12:32:22 -0800

FHA Condo Approval Specialists – Update on Investor Ownership

In Mortgagee Letter 2012-18, HUD issued new guidance for condominium processing and approvals regarding a number of criteria.

One such modification was to that of Investor Ownership for Existing and Non-Gut Rehabilitation projects.

For decades, HUD has required that no single person or entity may own more than 10% of the units in a condominium project. One of the primary reasons for this is it gives one entity too much control over the financial direction (and viability) of the project.

The temporary guidance – which expires 8/31/2014 – now allows one investor/entity to own up to 50% of the units. There are several qualifiers to this percentage calculation:

· A Unit occupied by an investor is NOT considered an investment property and is NOT included in the calculation;

· Vacant and unsold units owned by a builder/developer are NOT considered to be investor-owned unless the unit is or has been previously occupied; and

· Eligible non-profit organizations and eligible governmental housing programs are subject to this concentration limitation when previously, they were not.

It was interesting to me that HUD would allow such a high percentage for Existing projects (which are projects that have been in existence for more than 12 months). I have received many inquiries from projects that have exceeded the 10% rule, but only by a small margin. This modification would now allow these projects to be deemed eligible whereas previously they were not.

This increase to 50% is far more valuable for Non-Gut Rehabilitation projects – which were lumped in with Existing projects for this guidance. In my conversations, this seems to be one of the greatest factors preventing these types of projects from gaining HUD’s approval.

For example, an investor purchases a project and wants to fix them up. The Units don’t require major mechanical work but are in a state of disrepair which has led to half of the tenants and Unit Owners moving out. When the project is purchased, the investor may own half of the units. His intention is to rehab the units and sell them, preferably to owner-occupants. This would generate more operating capital to continue the project.

Because the units have been previously occupied, they would be considered investor-owned and the project would be ineligible for approval with HUD.

Not everyone sees this increase as a good thing.

In a recent phone conversation, a President of a condominium association thought this was a bad move on HUD’s part. It was of her opinion that it could allow “slum lords” to purchase multiple units and not care about the general upkeep of the project. Having so many votes in the Association would allow great power especially because so many Unit Owners don’t typically attend the voting sessions.

I am not as pessimistic because if a project is not looking to get approved with HUD, her slum lord scenario could still occur.

HUD is making these modifications to help to stir the housing market while still working to mitigate risk.

I think this is a good move by HUD. I have spent time with those who write the guidance for condominiums and they are caring, intelligent people. They have a responsibility to the US Government in controlling cost while working to provide the public with financing options that make sense.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

OK Mr. President – I Will Check the Record

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Tue, 23 Oct 2012 07:44:12 -0700

OK Mr. President – I Will Check the Record

I typically avoid posting political commentary. However, with so much at stake regarding our country’s – and our lives’ – future, I thought that I would break tradition, if only for the next 14 days.

Listening to the debate last night and cruising around and posting on Facebook, it became apparent that the current administration is taking full advantage of the ignorance of the American voter and the bias in the major media outlets.

One case in point is the President’s claim that Romney wouldn’t have allowed government intervention for the failing automobile industry, which Romney refuted. The President told Romney “…that is not what you said…check the record.” Clearly the President did not count on anyone – mainly the mainstream media who are completely in his satchel – to verify this brazen challenge and out him for this outright lie.

So I did.

In the Op Ed piece that Romney wrote on 11/18/2008 titled “Let Detroit Go Bankrupt”, he called for drastic restructuring of the big auto makers which included a managed Bankruptcy. He also said “…the federal government should provide guarantees for post-bankruptcy financing…” That sounds like help from the government to me.

Mr. Obama would have us believe that Romney would not have provided any government aid to the failing companies. This is simply not the case, as noted above. Obama also claims that Romney would have allowed the auto makers to fail. Obviously, Obama is counting on the typical voter to not know the difference between Bankruptcy and failure.

Over the past year or so, Obama has been touting himself as having saved the automobile industry. Apparently, he fails to remember that it was his predecessor, George W. Bush, who approved the bailout of the auto makers. The first checks were written during Bush’s administration. Romney’s Op Ed piece disagreed with the President’s handling of the situation even before Obama took office.

Obama also praises his own efforts in bailing out the automotive industry which provides more jobs here in the United States. That is very interesting to me because the majority of those employed by GM are outside of this country. In fact, only 1/3 of the employees of GM are in the United States. In addition, 7 out of 10 GM cars are manufactured outside of the US.

Way to invest in America, Mr. President.

Of the Big Three auto makers, the Ford Corporation has seen the biggest rise in sales and profits…and it declined government money.

So when someone says that Romney called for Detroit to fail, please educate the unfortunate, misinformed person that calling for Bankruptcy is NOT the same thing as calling for failure.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approvals – Update on Appendix A: Project Certification

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Tue, 16 Oct 2012 11:10:41 -0700

FHA Condo Approvals – Update on Appendix A: Project Certification

Last month, HUD released Mortgagee Letter ML2012-18 which provided updated guidance on condominium approvals. Among the updates was a new version of Appendix A, otherwise known as the “Project Certification”.

When I attended the HUD seminar in Philadelphia in September 2011, the original version of Appendix A had recently been made effective. Here, the speakers from HUD noted that they were working on a new version of the form. Last month, the new form was released and was to be effective October 13, 2012.

Last Friday, October 12, HUD issued an email notification that updates the Project Certification form. It removed Item #2 on the certification which read “I have reviewed the condominium project application and in reliance upon advice given by my attorney, it meets all State and local condominium laws”.

I have had customers of mine balk at this phrasing over the past few weeks and I can only imagine how much negative feedback HUD received over this language. Needless to say they are quite pleased with the change.

At the seminar in Philadelphia last September, HUD told us that the primary purpose of this form was to hold someone accountable for the information and paperwork that was being supplied to it if they suspected that fraud was involved. In recent years, HUD had required an “attorney opinion letter”, which it no longer does.

In this regard, HUD is simply looking for a contact point that can vouch for the information being supplied as a basis for approval. They mentioned that HUD infrequently investigates individuals unless they suspect that blatant fraud is involved.

Examples aside from lying on the application or providing false documents, such fraud could include not disclosing an upcoming Special Assessment, lawsuit or withholding information regarding structural or financial defects within the condominium project.

In all, this modification adheres to HUD’s “common sense” approach to condominium approvals while still placing emphasis on mitigating its risk.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approval Specialist – Two New Mortgagee Letters

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Wed, 27 Jun 2012 03:55:36 -0700

FHA Condo Approval Specialist – Two New Mortgagee Letters

HUD released two new Mortgagee Letters last week.

The first of these updates lenders regarding HUD’s policies regarding unpaid taxes and fees for foreclosed properties prior to conveyance to HUD. You can read it in its entirety but here is the gist of the sections:

· Mortgagees (lenders) must pay all taxes prior to conveyance to HUD. It also spells out the requirements to maintain copies of the receipts and invoices for all taxes paid prior to conveyance. If the lender does not pay the taxes on time, HUD ruled that it is not responsible for reimbursing the lender for any late fees or penalties. Repeat offenders will be referred to the Office of Lender Activities

· Mortgagees must pay HOA fees prior to conveyance. This section outlines the necessary steps for the foreclosure process when the property is a condominium and what to do if the HOA fees survive the foreclosure process. HUD reimburses lenders 100% of the fees paid to the HOA, which also include late fees and other penalties imposed by the HOA on the mortgagor.

· Mortgagees must pay all unpaid water, sewer and other assessments. It is the lender’s responsibility to research and pay any and all outstanding water, sewer or other assessments on the property prior to conveyance to HUD.

· Mortgagees to provide title evidence for manufactured homes. It must ensure that the home is attached to the land on the title, that the home is classified and taxes as real estate and that the manufactured home’s title has not been surrendered or purged (in accordance with local jurisdiction).

Mortgagee Letter ML 12-12 simply states that the lenders must adhere to local and State laws while in possession of the repossessed properties.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approval Specialist – HUD Rescinded New Credit Requirements

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Tue, 26 Jun 2012 08:28:26 -0700

FHA Condo Approval Specialist – HUD Rescinded New Credit Requirements

HUD’s Mortgagee Letter, ML 12-10 rescinded a previous update in the guidance provided by ML 12-3 which would require applicants to provide evidence that collections accounts are either paid off or are on payment plans.

I have updated a previous article that I wrote on what changes HAD been made by HUD back in April. The changes were slated to take effect on July 1, 2012.

This news is sure to make potential applicants, mortgage loan officers and Realtors very happy. These days, it is not often that credit guidance is loosened by HUD.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approvals – New Construction FHA vs Fannie

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Thu, 17 May 2012 06:43:03 -0700

FHA Condo Approvals – New Construction FHA vs Fannie

I received an email via Activerain two days ago from a developer looking for information regarding his proposed condominium project and asked what the difference is between a HUD approval and a Fannie Mae approval.

Here is what I wrote back to him:

There is a big difference; they are separate loan programs, first off. Fannie and Freddie financing programs are stricter and require larger down payments; they are referred to as “conventional” loans. FHA loans are government loans and have more lax criteria for approval and smaller down payments.

The processes and costs are also different. There is no cost to apply with HUD for an approval. There can be a substantial cost to apply with Fannie Mae depending on the number of units.

In my understanding, there is no real need to get approved with Fannie Mae, which costs $1200 plus $50 per unit, last I checked. What this will do is get the project on Fannie’s approved condominium list. However, if the project is not on Fannie’s list, the lender who is underwriting the loan MAY (not always) ask for a full project review. This entails supplying paperwork to the lender so that it can determine whether or not it is within the risk tolerance. Each lender will have to do this but on your end, once you have assembled the paperwork the first time, it would simply be a matter of supplying the same paperwork each time, if necessary.

However, the project MUST get approved with HUD for FHA loans to be available in the project. HUD maintains an approved condominiums list and if the project is not on that list, FHA loans are not available in that project.

This is important because a very large percentage of condominium purchases are with FHA loans. These loans offer less down payment and more lenient credit-qualifying requirements, both of which make it easier for potential buyers. Being on the HUD list could be the single most important factor in being able to sell units.

In addition, Fannie Mae only allows a 30% concentration of Fannie loans in a project. Freddie Mac has the same requirement. However, HUD allows for up to 50% concentration for FHA loans (and up to 100% after the project is complete for 1 year and the voting control has transferred to the unit owners). Therefore, without HUD approval, you could sell 60% of the units with conventional financing and the other 40% would have to be cash buyers or must arrange financing through a local bank or niche lender.

Most important to the developer is the presale requirements of the two, that is, the number of units which must be sold in the project prior to FHA, Fannie or Freddie financing may be used.

Fannie and Freddie have a 70% presale requirement (51% in some instances). This means that before conventional financing may be used in this new development, 70% of the units must be sold first.

HUD’s presale requirement is only 30%, which means that FHA financing could be utilized after selling only the first 30% of the units.

Another point that your developer would be interested in is the concept of legal phasing as a strategy.

Let’s say that the total number of units in the project will be 100. According to the presale requirements above, 30 units would have to be sold prior to FHA loans being available and 70 units would have to be sold before Fannie/Freddie loans are available.

However, if the developer breaks it down into 10 legal phases of 10 units each, only 3 units would have to be sold prior to the first FHA loan. Each time an additional legal phase is completed, the presale requirement will already be met.

NOTE: Legal phases are different than “marketing” phases and must be included in the legal documents. If the Declaration calls for all 100 units in one phase, then it is not legally phased.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approvals – Top 3 Reasons for Rejection

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Wed, 16 May 2012 06:10:33 -0700

FHA Condo Approvals – Top 3 Reasons for Rejection

Although all of the condominium projects that I have submitted to HUD have been Approved, it is not uncommon for projects to get Rejected initially. Many times, this just means that HUD needs more information or something doesn’t quite meet its guidelines but may be fixable.

Below are the three most common reasons for a project to get Rejected. If you can avoid these, you should have a much easier time getting a project approved.

1. Inadequate Budget. There can be many reasons why HUD will Reject a project because of its budget but the most common is not collecting sufficient common fees to support its expenditures, not including capital improvement projects. When this happens, the Association “borrows” money from the reserve account to pay for the shortfall. This is a big “no no” with HUD. The reserve account is only to be used for major maintenance projects and capital improvements. Reserve funds are not to be used for operating funds.

2. Insufficient Reserve Account or Reserve Contribution. The annual budget is to transfer 10% of its common charges to a separate reserve account. This account must be maintained at or above 10% of the annual budget, as a rule of thumb. This may be confusing but just keep in mind that HUD verifies both of these for every project.

3. Excessive Unit Owner Delinquency Rate. This has become more of an issue as the economy has been suffering and we have many unemployed or underemployed unit owners. HUD’s guideline is that no more than 15% of the unit owners may be 30 days or more delinquent in payment of the common charges. HUD will allow up to 20% to be delinquent, but there must exist significant “compensating factors” in order to gain an Approval. This can include strong evidence that supports the financial viability of the project despite this lack of income.

One of the reasons that has led to my company’s success in getting condominium projects approved is how thoroughly we scrub the packages prior to sending them to HUD. All three reasons listed above are so easy to find, but not always easy to rectify. We work with the Associations to help provide to them solutions that will be acceptable to HUD.

It is also important that the projects maintain compliance if they want to get recertified every two years with HUD.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approvals – I Wouldn’t Recommend That…Either

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Mon, 14 May 2012 05:22:30 -0700

FHA Condo Approvals – I Wouldn’t Recommend That…Either

My blog posts about legal phasing and another about investor concentration resulted in a phone inquiry for a situation which I had not previously encountered. But, then again, I don’t live in Florida…

A member of an investment group called me with reference to a 200-unit condominium project in Florida. The buildings were built in the 1970’s and converted to condominiums in 2005. During the marketing phase, the market tanked, as we all know, and the developer went bankrupt.

Fast-forward 5 years and this investment group purchased some 145 units in the project and has spent the past 2 years completing or renovating the units and then rented a bunch of them.

Now they wanted to gain HUD’s approval to facilitate selling them.

I told my caller that the project is not approvable.

He asked about legal phasing and I told him that it was not possible because HUD doesn’t allow legal phasing for conversions.

Then he suggested creating several LLC’s and then transferring units from his LLC to his other LLC’s such that none of the individual LLC’s would own 10% or more of the units.

I told him that there is nothing stopping him from doing that. However, one of the forms that must be completed is a Project Certification form. The signor of this form is certifying under penalty of law that the condominium project meets HUD’s guidelines.

Does it technically meet HUD’s guidelines? I guess that technically it does.

But let’s suppose that this developer also goes bankrupt, which could happen, and HUD suffers financial losses. It will launch an investigation to see what happened and if there was fraud involved.

How is HUD going to look at the same person or investment group having 21 separate LLC’s that own 145 units? Oh, and by the way, the LLC’s were created just prior to the application to HUD for approval.

That doesn’t smell right to me. I wouldn’t think that it would pass HUD’s sniff test either.

In my opinion, HUD created these guidelines for a purpose: to mitigate its risk. FHA financing programs already offer a significant risk for financial losses, as does relatively lax guidelines for condominium project approval. Whether we like it or not, if HUD assumes too much risk it could possibly face bankruptcy.

The housing market would certainly be worse off without FHA-insured loans.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approval Specialist – Happy Customers

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Tue, 01 May 2012 11:17:02 -0700

FHA Condo Approval Specialist – Happy Customers!

In my experience of helping more than 50 condominium projects to get approved with HUD, it is an absolute thrill for me to receive positive feedback from those with whom I have worked. While it is exciting to accomplish the task of gaining their HUD approvals, it is so much more gratifying to receive the appreciation for having done so!

Here is some feedback that I have received recently:

"We have recently had the good opportunity to use Eric Boucher from Integrated Processing Solutions to secure an FHA approval for one of the condo complexes we manage. Eric Boucher, the FHA condo approval specialist was great. Eric did everything he promised to and in the exact time frame that we expected. The Fox Hill Condo Association was so thrilled to get the good news so quickly. We at G&W Management Inc. would highly recommend using Eric Boucher." ~ Mike and Chrystal, G&W Management, Inc.

"I wanted to take a moment to write of my appreciation for the work that Eric Boucher of Integrated Processing Solutions has done for a number of clients that I manage through Elite Property Management. His efforts to get the condominium associations FHA approval were greatly appreciated. I would surely recommend Eric Boucher to provide this service for any association in need of gaining FHA approval." ~Michele, Elite Property Management

"As a past customer of Eric Boucher, I am pleased to recommend his services. Eric was indispensable in assisting our condominium association with obtaining FHA approval. The process was much more detailed and rigorous than I and the other board members had initially thought. Eric provided us with an easy to use checklist and list of documents required to submit the correct packet of information to the U.S. Department of Housing and Urban Development. Since our association was unfamiliar with the process, we had numerous questions, and Eric was responsive to our inquiries regarding the materials we needed to put together." ~Jennifer, 1776 TownHomes, Ellington, CT

"The accuracy and completeness of the checklists and guidance that Eric has to offer turns the FHA approval process from a daunting, seemingly endless task into a mere couple of days of paperwork gathering and mailing. My Condominium Association was approved by the FHA on first glance with only a few minor follow-up questions from the FHA due to Eric's assistance in the process." ~Brian, Quonnipaug Hills Section III, Guilford, CT

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

New FHA-Insured Loan Guidance Effective 7/1/2012

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Thu, 12 Apr 2012 06:54:52 -0700

New FHA-Insured Loan Guidance

**Update: Mortgagee Letter ML 12-10 rescinded these changes.**

In Mortgagee Letter ML 12-3 FHA released updated loan guidance which slightly modified credit-qualifying criteria. These changes are to take effect for case numbers assigned on or after July 1, 2012.

Collection Accounts:

Old Guidance: FHA Does not require that collection accounts be paid off.

New Guidance: If the total aggregate balance of collection accounts is greater than or equal to $1000, the borrower must “resolve” the accounts or pay them in full prior to or at the closing. “Resolve” means entered into a payment arrangement and can document at least three months of on-time payments. The payments for Resolved accounts must be included in the borrower’s DTI.

NOTE: Paying down balances to below an aggregate of $1000 is not acceptable.

Disputed Accounts/Public Records:

Old Guidance: If the credit report reveals that the borrower is disputing any credit accounts or public records, the mortgage application must be referred to a DE underwriter for review.

New Guidance: If the Automated Underwriting System using the TOTAL Mortgage Scorecard rates the application as an Accept, the mortgage application will not be referred to a DE underwriter for review due to the disputed accounts if the accounts meet BOTH of the following conditions:

· The aggregate balance of all disputed accounts/collections are less than $1000

· The disputed accounts/collections are more than two years old as indicated by the date of last activity on the most recent credit report.

If the borrower has one or multiple disputed credit accounts/collections with singular or aggregate balances equal to or greater than $1000, then the requirements are the same as posted above in the Collection Accounts section.

Disputed credit accounts/collections resulting from identity theft, credit card theft or another form or unauthorized use will be excluded from the $1000 limit. Documentation must be provided to support that the accounts were the result of unauthorized use such as a filed identity theft report or police report.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

HUD Emailing List

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Wed, 11 Apr 2012 05:52:49 -0700

HUD Emailing List

For those of you who aren’t already aware, you can sign up for to be on HUD’s email list. HUD periodically distributes emails that contain recent updates and broadcast trainings.

The content is primarily geared towards lenders, especially those who are unlimited Direct Endorsement lenders, but the content is also valuable for Real Estate Agents and Mortgage Loan Officers as the information gives insight into the changes to which lenders will have to adapt. From an RE Agent’s or Mortgage Broker’s view, it can help to foretell upcoming changes in lending practices as it pertains to FHA-insured loans.

If you want to sign up for the newsletter, simply send an email to jarrold.h.mayer@hud.gov and vertically list the emails that you would like to register in the body of the email. You can list as many as you want. The emails come sporadically, but typically twice per week.

Today’s email contains the following content:

Bulk FHA Case Number Cancellation Instructions for Lenders:

Purpose: To allow case number cancellations in bulk for FHA loans that qualify for the reduced Mortgage Insurance Premium (MIP) structure described in Mortgagee Letter (ML) 2012-04.

Affected Product: Streamline Refinance Transactions which have not yet closed

Effective Date: Lenders may submit bulk case number cancellation requests immediately. Although FHA Homeownership Center (HOC) staff may begin immediately to cancel case numbers, no new case numbers will be issued until June 11, 2012.

FHA Connection (FHAC) will check cancellation requests for the following criteria:

· The case number to be canceled is for a streamline refinance.

· The case number to be canceled is for a mortgage that has not yet closed.

· The existing mortgage was endorsed on or before May 31, 2009.

Reminders

· FHAC does not perform a net tangible benefit test (see ML 2011-11 at: http://portal.hud.gov/hudportal/documents/huddoc?id=11-11ml.pdf and HUD Handbook 4155.1.6.C, at: http://portal.hud.gov/hudportal/documents/huddoc?id=4155-1_6_secC.pdf

It is the lender’s responsibility to ensure that the new mortgage meets the net tangible test.

· A streamline refinance which reduces the term is acceptable if the new mortgage meets the net tangible benefit test.

Important Dates:

May 31, 2009: Latest endorsement date of existing FHA-insured mortgages being refinanced which qualify for case number cancellation if meeting all other criteria for cancellation.

April 09, 2012: Availability of Endorsement Date on the Refinance Authorization Query Screen in FHAC. The Refinance Authorization Screen can be found on the Case Processing Screen.

April 27, 2012: Availability of “Different MIP Structure” as a reason for cancellation on the Case Cancellation Screen in FHAC. FHAC will check that the new FHA loan meets the eligibility criteria for the lower MIP structure described in ML 2012-04.

June 11, 2012: Lenders may request new case numbers for FHA to FHA streamline refinance loans that are eligible for the lower MIP structure described in ML 2012-04. New case numbers issued prior to June 11, 2012 are not eligible for the lower MIP structure.

Non Credit Qualifying Streamline Refinance: No appraisal is required. However, if the appraisal already exists:

· and expires before the loan closes, the lender may process the streamline refinance without an appraisal, using FHA guidelines; or

· if the appraisal will be valid when the loan closes, lenders must click the appropriate check box on the Appraisal Logging Screen in FHA Connection which certifies that the date of the appraisal precedes the FHA case number assignment date because the previous FHA case number was cancelled.

Credit Qualifying Streamline Refinance: If the appraisal will expire before the loans closes, the lender must obtain a new appraisal after receiving a new case number. Lenders may charge the cost of the new appraisal to the borrower. The cost of the appraisal may not be financed into the new mortgage.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

Help, Please!

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Thu, 05 Apr 2012 05:48:26 -0700

Help, Please!

I am in search of a processor for my company, Integrated Processing Solutions. Integrated aids condominium projects to gain or maintain their approvals with HUD.

With the slowdown in the mortgage and real estate industries, I am optimistic that one of you will know of someone who has experience processing loan files and/or is adept at reading legal documents.

I am looking for someone who meets these criteria:

· Experience processing/packaging files, such as loan applications

· Experience reading legal paperwork

· Great attention to detail

· Good sense of urgency

· Excellent computer acumen

· Gets along well with others

· Sense of Humor

I am in Connecticut but it is not required to live here so long as he/she has a fax machine, scanner, computer, printer and phone and internet connection. Integrated helps condominium projects nationally so location is not very important.

The duties of the position include:

· Analyzing paperwork for certain qualifying criteria

· Assisting in the gathering of documents

· Packaging files for submission

Please get in touch with me at any of the contact points located below.

Thank you!

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

7 Silly HOA vs Unit Owner Disputes

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Wed, 04 Apr 2012 03:16:03 -0700

7 Silly HOA vs Unit Owner Disputes

Last week, I posted an article about an HOA fining a unit owner for displaying a Mezuzah on her exterior door frame. A couple of days later, I read another article about some absurd suits filed by HOA’s against unit owners.

While these appear to be disturbing, especially the one pertaining to the US Veteran in my opinion, I don’t believe that they are uncommon.

Please take a moment to add your own personal experiences in the comments section below.

7 Silliest Homeowners Association Battles in Suburban History

by www.homeinsurance.org

1. The Clothesline Lamentation

In Bend, Oregon, a homeowners association made the decree that residents could not hang their clothes to dry on a clothesline. When 55-year-old Susan Taylor challenged this rule, a lawsuit was brought upon her. The homeowners association was strong in its decision even though using clotheslines over driers saves a great amount of electricity and reduces carbon dioxide emissions into the environment. According to the homeowners association, hanging clothing to dry is associated with poverty; it speaks lengths as to not being able to afford a dryer. This deduction couldn’t be more ridiculous. Aside from the obvious green initiative that comes with line-drying your clothing, it also can keep clothing intact for longer without the wear and tear that comes with using the dryer. It costs each household an estimated $80 per year to run a standard dryer.

2. Kangaroo Rights

Nick and Jeni Dreis from Spring, Texas got their mentally disabled daughter Kala a “therapy” kangaroo, against which the homeowners association immediately lashed out. The 6-month-old red kangaroo was to be a vocational training animal and lived in their home with them. After the homeowners association sent the family a letter asking for immediate removal of the kangaroo, the public and press protested on behalf of the Dreis family, causing the homeowners association to back out of its initial claim. The homeowners association was embarrassed, publicly stating that they had no idea the kangaroo was intended for therapeutic means. This is just a classic example of the homeowners association inserting its foot into its mouth. Had it taken the time to gather all the details before executing its tirade upon the family, it would not have received such tremendous backlash.

3. The Flag Flyer

Fred Quigley, a retired army veteran, came under fire from his local homeowners association in Macedonia, Ohio for raising an American flag in his front yard. The flag is a standard three-foot by five-foot flag on a pole, as seen on school grounds across America. The homeowners association offered a couple of weak concessions, such as moving the flag to the development’s entrance or attaching a much smaller flag to the home itself. Quigley fought in the Vietnam War and is adamant on fighting for his right to express his patriotism. The homeowners association has also said it will not back down, and will be filing a lawsuit. Although it would be one thing for Quigley to have a 10-foot purple dinosaur statue in his yard, a flag is in no way damaging the overall aesthetic of the neighborhood. The homeowners association has proven to be power-hungry for the sake of being power-hungry.

4. Driveway Dilemma

A.J. Vizzi of Odessa, Florida spent $200,000 in a legal battle with his local homeowners association over his right to park his truck in his own driveway. When Vizzi moved into the home, he specifically asked the homeowners association if parking in his driveway was allowed, as his large truck would not fit in his garage. At the time, it consented. However, years later, the homeowners association has changed its stance on the topic and ended up taking Vizzi to court. Ultimately, Vizzi won his case, as well as a surplus of $187,000 in legal fees. The fact that Vizzi even had to take this case to court was ridiculous. The homeowners association should have been focusing its efforts on much less frivolous things within the community.

5. Kids In Play Problem

Residents in Volusia County, Florida have been told by their local homeowners association that it will be passing a law that bans their children from playing outdoors in the confines of their own yards. The edict specifically states that children can’t play outside without constant adult supervision, and they are also prohibited to engage in skateboarding, tag or other running games, or using loud toys. Basically, the homeowners association has made it such that children can’t be children in Volusia County. If the law comes to fruition, there will be a $100 fine for breaking it. As expected, parents within the community have decided to fight it out. The board of this homeowners association must not have children of their own; otherwise, they would understand the consequences of depriving children of a safe place to play. As if obesity rates in children in America weren’t high enough, forcing them to stay inside and watch TV is not an alternative to expending their energy outside.

6. Christmas Light Fight

In Doylestown, Philadelphia, the local homeowners association has ruled that only white Christmas lights can be used to decorate for the holidays. The fight over colored Christmas lights is a common dispute among homeowners associations, but it has the potential to become extremely heated, which is why it would be doing everyone a favor to just let it go. One of the residents, Marie Buonnano, put up multi-colored lights regardless, and was fined $400. If she chooses not to pay, it will be a lien on her home. In spite of a petition signed by 62 residents in the neighborhood, the homeowners association stands by its grip on the resident’s rights to decorate for religious holidays as they please.

7. Handicap Spot

In Lakewood, Colorado, a disabled veteran is battling his local homeowners association over his right to a handicap parking spot in the condominiums where he lives. According to the veteran, Marcus Cook, a handicap parking curb once existed, but the homeowners association painted over it when it resealed the lot. The homeowners association has taken it upon itself to decide exactly how handicapped the man is, claiming he hasn’t demonstrated a need for a spot even though Cook uses a wheelchair and has a wheelchair-accessible van. Cook suffers from neuropathy and has all but lost feeling in his feet, which is why the wheelchair is absolutely necessary. The homeowners association, in this circumstance, is kidding itself if it doesn’t realize that what it is doing to Cook is blatant discrimination. It even told him, if his handicap-accessible van didn’t fit in his regular spot, to simply “get a smaller van,” as though the problem could be rectified therein.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

Woman Fined By Condo Association for Displaying Jewish Symbol on Door

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Fri, 30 Mar 2012 11:18:51 -0700

Woman Fined for Displaying Jewish Symbol on Door

A woman in Stratford, CT, was fined $50 per day for displaying a Mezuzah on the exterior door frame of her condominium. The story reported that the attorney for the woman noted that the neighbor is displaying a crucifix but did not mention if the neighbor was also fined. [The original story is located here.]

This is interesting to me and I will monitor it as I am very curious as to the outcome. It has more than just a religious component, it is a question of whether or not the By-laws infringe on unit owners’ right to practice their own religions.

The By-laws of this condominium project forbid the displaying of any item on the exterior of the unit. This is an extremely common restriction in the legal documents of condominiums. So I think this goes beyond a sort of religious persecution unless the neighbor wasn’t fined in the same manner.

In the state of Connecticut, there is a three-day rescission period for the purchases of condominium units. During this time, the prospective buyer is to read the legal documents and review the financial status of the project. If the buyer uncovers something that is objectionable, he/she has the right to rescind during the three-day period.

In practice, this very rarely happens in my 10 years of experience as a real estate agent in Connecticut. I would like to know if the woman read the By-laws, specifically the section forbidding the displaying of anything on the exterior of the property.

I am not against people practicing their religion. However, if the By-laws clearly state this restriction, then it was her right to not purchase a unit in that project. By purchasing the unit, she has agreed to abide by all of the restrictive covenants in the governing documents.

She and her attorney are protesting that the By-laws violate an individual’s rights. The flip side is that the person also has the right to not purchase in that project.

I encourage your comments on this matter.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approvals – I Wouldn’t Recommend That

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Mon, 26 Mar 2012 03:39:15 -0700

FHA Condo Approvals – I Wouldn’t Recommend That

This past week, I fielded a call from New Mexico from the developer of a condominium project regarding getting approved with HUD/FHA. She had run across my article about new construction and had questions for me regarding her project.

The project is in two phases and only the first phase is complete, a total of 50 units. Of those, 8 are owned by the developer and are rented to tenants. This means that she owns more than 10% of the units and the project is not approvable.

She then tells me that technically the 8 units are owned by three different legal entities but that the entities all have the same principals.

How would HUD know that they are owned by the same people?

My answer was that it probably wouldn’t. I have never had HUD ask who the principals are of the entities that own the non-owner occupied units.

However, one of the forms that must be completed is Appendix A, which is called a “Project Certification”. On it, the signer is certifying that the project meets HUD’s guidelines for approval.

Knowing that the project does not meet HUD’s requirements because the same people own more than 10% of the units and signing the certification could be considered as fraud.

My question to the developer was “if something went wrong in the future and you went bankrupt, HUD will launch an investigation. How would HUD view this situation if it uncovered that the three entities were owned by the same people?”

We agreed that it could be seen as fraud and decided not to pursue the approval until the project composition had changed.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approvals – Another Site Condo Question

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Thu, 22 Mar 2012 10:41:05 -0700

FHA Condo Approvals – Another Site Condo Question

Last week, I received a call from a member of the Board of Directors for a condominium project in Yuma, AZ. He called me after reading my blog article about site condos.

He said that his project consists of 12 units, all of them detached from each other. Each unit owner is completely responsible for the maintenance of his/her own unit which includes the exterior, front and rear steps and the attached deck or patio.

That sounds like a site condo to me.

Here’s the catch: to each unit is allotted an adjacent piece of land onto which the unit owner can build a garage. The land is a “limited common element” until the unit owner builds on it. If he/she never builds on it, it remains a “limited common element”.

The question was: “are we site condos?”

The answer was: “I don’t know.”

In order to provide to him an accurate answer, I requested that he send to me the Declaration so that I could read how it was written.

Upon review of the Declaration, it stated very clearly that the unit consisted of the interior and exterior of the structure and included any deck, patio and front and rear steps. The appurtenant piece of undeveloped land was to remain as a “limited common element” until such time the unit owner was to build on that land.

At that point, the improvement to the land – that is, the physical structure – was to become part of the “unit” and the unit owner was to bear its cost of maintenance. This is acceptable so long as the garages or other improvements to the appurtenant land were not attached to those owned by other unit owners.

Notwithstanding any other facet of the condominium project, this would meet the criterion of being classified as a site condo because the unit owner is fully responsible for the maintenance of not only the interior and exterior of the unit, but also for the interior and exterior of the garage, were it to be built.

Incidentally, the condominium project met the other 4 requirements to be considered a site condo so it was not necessary for this project to gain HUD’s approval in order for the units to be eligible for FHA financing.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approvals – Site Condos Question

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Wed, 21 Mar 2012 03:38:03 -0700

FHA Condo Approvals – Site Condos Question

Yesterday, I received a call from an appraiser in Tempe, AZ, asking about site condos. He was working on an appraisal for a condominium and had a question as to whether or not it was a site condo. In doing research, he ran across my blog article so he called me.

According to the appraiser, none of the units are attached and each unit has an attached garage. This, by definition, would make them appear to be site condos.

However, the declaration states that the maintenance for the stucco siding and the tile roofs are the responsibility of the Association and not the unit owner.

Per HUD, in order for a condominium project to be classified as a site condo, the unit owner is responsible for all maintenance of the unit, including the garage and all attachments. This includes the siding and roofs of the units. HUD has also clarified this as to include any attached decks and even the front or rear steps of the units.

Therefore, this project would not be classified as a site condominium and would be required to get approved with HUD before being eligible for FHA financing.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approvals – Another Project Approved

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Mon, 19 Mar 2012 10:22:17 -0700

FHA Condo Approvals – Another Project Approved

So far this year, every project that I have submitted to HUD has been Approved on the first try. While I am extremely proud of this, by no means do I expect that they will all go this way.

One of the reasons for this rate of success is how thoroughly the package is scrubbed prior to sending it to HUD.

I’ll give an example of one of these from Manchester, CT, and the timeframe involved.

I was initially hired by the condominium project in June 2011. Upon receiving the required documents, it was clear that the project was not approvable due to the budget, that two of the buildings resided in FEMA Flood Zone AE according to the flood map, the insurance was insufficient and they were in the process of working on a Special Assessment for excessive expenses due to the wild winter early in 2011.

So we went to work.

Further investigation determined that the FEMA flood map was revised. The project had hired engineers to do survey work and they sent the data to FEMA, which later issued a LOMA (Letter of Map Amendment) removing the two buildings from Flood Zone AE. I took pictures of the buildings in reference to the others to further demonstrate to HUD that the two buildings mentioned in the LOMA were the same as those located in Zone AE on the flood map. Problem solved.

The insurance coverage needed to be increased from $200,000 to $250,000 for the Fidelity/Employee Dishonesty policy. This coverage needs to equal or exceed the total of 3 month’s aggregate collected common fees plus the amount held in the reserve account(s). This was an easy fix and the increase in annual premium was less than $100.

While the Association decided how to handle the added expenses from the excess snow and ice damming, we had to tackle a bigger issue. The budget did not include a line item whereby 10% of the collected common charges are transferred to the reserve account(s).

Prior to June 30, 2011, HUD was a little more lenient when it came to transferring funds to the reserve account. I had helped several projects to get Approved with HUD whose budgets did not meet this requirement BUT did have substantial funds in the reserve account. Upon releasing the Condominium Approval and Processing Guide on 6/30/2011, HUD required strict adherence to this requirement.

I examined the budget and made several suggestions as how to modify it to include this 10% contribution to reserves without the need to raise the common fees. The Board opted for one of my suggestions but in order to change the budget after it had been ratified, it needed to go to Association vote. This took a couple of months.

Once the new budget and Special Assessment were approved, I assembled the submission package and sent it to HUD.

One month later it was Approved without HUD requesting further documentation from us.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approvals – Approved on the First Attempt

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Tue, 07 Feb 2012 10:34:40 -0800

FHA Condo Approvals – Approved on the First Attempt

Recently, I was able to accomplish something working with HUD that only happened to me once during my 10-year tenure as a mortgage loan originator: a couple of my submissions for condominium approval were approved on the first attempt!

I am especially proud of this feat because I am continuously trying to hit a “moving target”. I say this because during the last two years, HUD has changed its guidelines for condominium approvals several times.

However, the primary challenge is that while HUD has provided us with a Guide outlining its requirements for condominium project approval, in many cases it did not spell out what documentation is needed to show that the project meets the requirements.

To speak in mortgage loan officer terms: it’s like a lender asking to verify the borrower’s income and we provide a pay stub. The lender then requests a month’s worth of paystubs and two W2’s. Then the lender notices that there is self-employment income and alimony in the bank statements and requests 2 years of tax returns and 6 months of bank statements, which could then lead to requests for more documentation.

Because the Guide does not specify what documentation is required by HUD, I have had to learn this through trial and error. Prior to June 30, 2011, I had locked it down. However, when the Guide was introduced on June 30, 2011, I had to learn my way around the new guidance and attended the only training that HUD has offered on this topic.

Putting all of this together has led to success in condominium project approvals as every condominium project with whom I have worked has been approved with HUD. The key to the success rate is a result of the thoroughness each package receives prior to being sent to HUD. I am able to identify issues or potential issues prior to submission to HUD saving valuable time.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approvals – Live/Work Condominium Projects

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Tue, 11 Oct 2011 14:10:52 -0700

FHA Condo Approvals – Live/Work Condominium Projects

Prior to HUD’s release of Mortgagee Letter ML11-22, there existed no guidance for Live/Work Condominium Projects. HUD considers Live/Work Projects to be those which have legally-designated units within the project that allow for non-residential use within a primarily residential project.

HUD does allow Live/Work Projects to be eligible for approval given that ALL of the following criteria are met:

Must be approved using only the HRAP (HUD) processing option.
The condominium declaration must state that the non-residential (work) space may not exceed 25% of the unit’s total floor area.
The work space may not exceed 25% of the project’s total floor area.
The non-residential work use must be subordinate to the units’ residential use and character.

The last requirement is interesting as it is somewhat subjective. What HUD is saying is that the units that have non-residential use must have the look and feel of a residence that also happens to house a business or have an element of non-residential use. The units must not look like a business where someone also lives.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approvals - Budgets

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Fri, 30 Sep 2011 11:33:56 -0700

FHA Condo Approvals – Budgets

HUD released new guidance regarding budgets when it issued Mortgagee Letter ML11-22. Prior to this, the review of the budget was somewhat subjective in nature.

I wanted to write about budget guidelines as it pertains to FHA condo approvals because HUD noted that more condominium projects are being Rejected due to budget issues than for any other reason. If projects understand what it is that HUD is looking for, it will alleviate a lot of the stress and make it easier for projects to get approved or recertified.

HUD looks at the financial viability of the project as a whole but investigates a few areas specifically.

10% Contribution to Reserves

HUD requires that there be a line item in the budget whereby 10% of the budget is contributed to a separate reserve account which is to be maintained for future capital improvements and maintenance costs. The 10% is calculated by taking 10% of the annual collected unit owners’ monthly dues/assessments. Money collected for late fees, clubhouse fees and/or interest income are excluded from this calculation.

Prior to the release of ML11-22, this requirement was loosely adhered to. I had worked with several condominium projects that were approved without the budget containing a 10% contribution to the reserve account but this is no longer acceptable. In those cases, the reserve account contained far more funds than HUD requires, which is a nice lead-in to the next section.

Reserve Account Equal to at Least 10% of the Budget

HUD requires that the condominium project maintain a reserve account for future maintenance and capital improvement projects equal to at least 10% of the annual budget. This is separate from the previous section. This means that not only does the budget need to contain a line item for contribution to reserves but the project must also maintain a reserve account of at least 10% of the annual budget.

In some cases, it is not enough to have only 10% of the budget in reserves, especially for older projects that may need capital improvement projects in the near future.

Balance Sheet

HUD requests a copy of the balance sheet dated within the past 90 days to gain an overall sense of the financial stability of the project.

Previous Year-End Income and Expense Statement

HUD also reviews the previous year’s Income and Expense Statement to determine if the budget for the previous year was properly developed and compares it to the current year’s budget. This gives HUD a better sense of how the HOA manages its funds from year to year.

Special Assessments

This is technically a realm aside from the budget but it is something that HUD looks at to determine the financial strength of the project. If a project must continually fund capital improvement projects with special assessments, then this could point to financial stress of the project as a whole, especially if used to fund the reserve account as mentioned above.

Special assessments, in general, are regularly accepted by HUD so please don’t understand this section to infer that if your project has a pending special assessment that it cannot be approved with HUD. I have helped many projects gain approval or to be recertified who have special assessments.

Loans

If the HOA has taken out loans, this is not immediate grounds for rejection. HUD will want more information regarding the purpose of loan and will look at it from a global perspective. As with special assessments, above, if the HOA acquired the loan as a means to keep the project financially viable, there could be a problem.

However, if the loan was taken out to replenish a depleted reserve account that was used to make repairs from some unforeseen catastrophe, then this may not affect the project’s approvability with HUD.

Insurance

The condo processing Guide states that the budget must “provide adequate funding for insurance coverage and deductibles.” HUD admits that it’s not necessarily the budget that must provide for coverage of the deductibles, but that the entire financial picture must show that if there is a need for an insurance claim, there must be enough funding to cover the cost of the deductible. This can be evidenced from the budget or from the reserve account, providing, of course, that it does not deplete the reserve account.

Reserve Study

If it is determined that the budget and financial strength of the project does not meet the above standards, a reserve study must be completed by a third party engineering firm. The cost of such a study falls on the Association.

A reserve study examines the structural aptitude of the project and investigates items such as the roof, siding, decks, pool and other structural components of the project. It then determines how much these items will cost the project should they need to be replaced and when they would need to be replaced. As a result, the reserve study would provide the project with accurate details as to how much should be in the reserve account and how much the annual contribution to the account should be.

If you have questions about your condominium project’s financial stability as it pertains to gaining or recertifying an FHA condo approval, it would greatly benefit you to have an expert investigate the above-mentioned items.

Photo courtesy of Graeme Weatherston

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com

FHA Condo Approvals - Philadelphia Training Day 1

Eric Boucher - The FHA Condo Approval Guy (Integrated Processing Solutions) — Tue, 27 Sep 2011 17:15:42 -0700

FHA Condo Approvals – Philadelphia Training Day 1

Today was the first day of a two-day training administered by HUD regarding the FHA condo approval process and its recently released Guide. I have been excited about this training since it was announced last month.

This is the first training provided by HUD on this topic for people who work outside of HUD. The Philadelphia training is their fourth and final destination of their “World Tour”, which began in Denver, CO. The other two stops included the other two Homeownership Centers, Santa Ana, CA and Atlanta, GA.

The facilitators of the training are those who wrote the Guide. The ability to ask questions to the very individuals who developed the guidelines is absolutely invaluable!

Among a litany of other outstanding information, which I will talk about in future articles, the mention of the number of approved projects nationally was striking.

HUD was in the process of making changes to their condominium approval process and system beginning in June 2008. At that time, they were importing projects from the old system to the new system. Roughly, 45,000 condominium projects were transferred to the new system. Some 8,000 approved projects were not imported to the new system because HUD did not have enough information on the projects to justify their importation.

By June 2011, around 10,000 projects had seen their approvals expire on 12/31/2010, 3/31/2011 and 5/31/2011. As of the end of June 2011, only around 800 got recertified.

Overall, 25,000 projects were facing the expiration of their approvals by the end of 2011. In total, only around 1,000 projects have been recertified as of the end of last month. According to HUD's estimation, the approved condominium list will have roughly 12,000-15,000 approved projects nationally, which is a dramatic drop from the 53,000 that it had prior to the changes.

One of the training facilitators attributed this to the fact that many projects are not financially viable at present so they have made no attempt to apply for a recertification. Another attributed it to the fact that Homeowner’s Associations simply don’t know that they have lost their approvals until a unit owner attempts to sell his/her unit or refinance with an FHA loan.

Furthermore, let’s consider a city in my state of Connecticut: Manchester. In 2010, Manchester had 41 HUD-approved condominium projects. Today, there are only 3: Greenview Hill, Hampton Run and Northfield Green. Granted, other projects may have begun the recertification process. I know that I am working on four project approvals in Manchester, all of which I fully anticipate being added to the approved condos list.

But, here is the point: if a buyer has been qualified for an FHA or CHFA loan and wishes to purchase a condominium in Manchester, he or she will only have three condo projects from which to choose!

Does that make those three projects more marketable? You bet it does. Sellers in those projects have access to a greater number of buyers which certainly aids in being able to sell their units, and for a better price.

If you live in a condominium project that is not currently approved with HUD, it needs to be. I have written articles on the need for HUD-approval. In this recessed housing market, HUD-approval is essential to the marketability of your condominium.

I am dedicated to helping condominium projects across the nation to gain their HUD approvals or become recertified with HUD. I can help your project.

Please contact me with any questions regarding HUD/FHA condominium approvals. You can email me at eric@integratedpros.com or call me at 404-433-4565. I will be happy to answer any of your questions.

FHA Condo Approval Specialist
404-433-4565 Cell Phone
eric@integratedpros.com