fha condo approval: That Doesn’t Count Towards the 10% Reserve Contribution - 11/10/15 08:03 PM
That Doesn’t Count Towards the 10% Reserve Contribution
It’s budget season for many condominiums who run on a calendar year and we have run across an issue with several of our clients and potential clients.  Everyone knows that FHA (and Fannie/Freddie) require that a condominium contribute 10% of its budget to the reserve fund each year.  So when don’t the contributions count towards the 10%?
When the funds are already delegated to fund an existing liability.  We have seen this many times but let’s take a recent example:
A condominium client’s budget is $450,000 so the minimum that they should be transferring annually to … (10 comments)

fha condo approval: More About FHA’s Stance on Condominium Leasing Restrictions - 10/01/15 08:48 PM
More About FHA’s Stance on Condominium Leasing Restrictions
Two weeks ago, I published an article about some recent clarifications by FHA regarding condominium leasing restrictions.  The article created quite a buzz and generated many calls and email inquiries regarding its content.  This is a follow-up article addressing some of those questions.
The section of the National Housing Act, 24CFR203.41, states that properties encumbered with FHA-insured loans must have free assumability with no restrictions except as stated in the section.  This includes leasing and conveyance restrictions which impact a unit owner’s ability to sell or lease the unit or reduce the unit owner’s proceeds … (7 comments)

fha condo approval: Airbnb and FHA Condominium Approval - 09/23/15 05:43 AM
Airbnb and FHA Condominium Approval
One of the topics on HUD’s agenda for the roundtable session last month was that of “Airbnbs”.  I have to admit that even with all of the condominiums that we have worked with, this was a new concept for me.  None of the legal documents of our condominium clients had any such language in them.
In case this is new to you, Airbnb is when unit owners allow overnight guests or trading of units on a temporary basis.  We understand that this is more common in areas where unit owners can provide an alternative to hotels in resort … (3 comments)

fha condo approval: What Condominium Leasing Restrictions Are Allowed by FHA? - 09/16/15 04:02 AM
What Condominium Leasing Restrictions Are Allowed by FHA?
FHA-allowed leasing restrictions in condominiums has been a hot topic as of late.  As we all know, a condominium’s legal governing documents may place restrictions on the leasing of units in the condominium.  These restrictions can vary greatly and recently HUD clarified what is and is not allowable.
[For information on the background of why certain restrictions are not allowed, you can follow THIS LINK to an article about 24CFR203.41.]
During the roundtable session that Eric attended in late August, the facilitator offered this broad statement:
“If the homeowners association has approval authority of a unit owner’s … (6 comments)

fha condo approval: How to Avoid Big Fines and Delays with HUD - 08/26/15 09:17 PM

Last week, I attended a two-day session about FHA condominium project approvals with HUD in DC.  Incomplete submissions and the Appendix A Project Certification were among the most important topics discussed.
First off, HUD will only review packages submitted by the following entities: Lender, Builder/Developer, HOA, Management Company, Attorney or Consultant.  They have been receiving packages from real estate agents, mortgage loan officers, unit owners and others.  Moving forward, any packages submitted by any entity who do not belong to the first group will be returned without review.
Secondly, incomplete packages submitted to HUD will be returned to sender prior to review.  It … (4 comments)

fha condo approval: Does HUD Allow Private Transfer Fees? Yes and No - 08/20/15 09:35 PM
Does HUD Allow Private Transfer Fees?  Yes and No
Over the past two days, Eric attended a session about FHA condominium project approvals at HUD Headquarters in Washington DC.  There were many topics discussed during the session, some of which are highly classified.  Well, not really because they will appear in future articles...so you’ll have to wait.
One of the major topics of discussion was Private Transfer Fees, aka 3rd party transfer fees, community enhancement fees or any other fancy name that you might have heard.  Basically, these fees are deed restrictions which require the seller of a condominium unit to pay a … (15 comments)

fha condo approval: The VA is Definitely Tougher on Condo Leasing Restrictions - 08/11/15 04:49 AM
The VA is Definitely Tougher on Condo Leasing Restrictions
In the past month, three of our condominium submissions have been approved by FHA and rejected by the VA - all for leasing restriction language.  Through at least the end of the year, when hired for FHA Condominium Project Approval, we are submitting for VA project approval if requested at no additional charge.  The VA submission package is similar to the FHA submission so we offer to do both.
[For those who don’t know, the VA requires condominium project approval prior to allowing VA financing to encumber any of the units in the project.]
The … (10 comments)

fha condo approval: Our Condominium Has 50% FHA Concentration - Now What? - 08/05/15 01:15 AM
Our Condominium Has 50% FHA Concentration - Now What?
Our first response would be to make sure that you don’t lose your FHA Condominium Project Approval!  Obviously, FHA buyers are attracted to your community so it would be beneficial to the association to maintain this approval.
Really, though, the question stems from the FHA guideline that the maximum concentration of FHA loans in a condominium is 50%.  FHA uses case numbers to track all FHA loans and no FHA loan may exist without one.  Once the 50% level is reached, case numbers may no longer be automatically assigned using FHA’s online system FHA … (33 comments)

fha condo approval: What Types of Condominium Projects are Approvable by FHA? - 07/30/15 12:59 AM
What Types of Condominium Projects are Approvable by FHA?
This is one of the most commonly-asked question that we receive.  The better question to answer is Which types of condominiums are NOT approvable by FHA?   Then we can deduce that all other types of condominiums are eligible for FHA condominium project approval.
These projects are ineligible for FHA condominium project approval:
Projects where more than 25% of the total floor area is non-residential.  That is the basic guideline although there may be exceptions granted that will allow up to 50% in certain circumstances.
Timeshares and Condohotels (Condotels).  Segmented unit ownership or condominiums that … (2 comments)

fha condo approval: Can We Use Reserve Funds for Landscaping During Drought? - 07/28/15 02:20 AM
Can We Use Reserve Funds for Landscaping During Drought?
We receive a lot of questions from associations on how they are able to use their reserve funds and still be eligible for FHA condominium project approval.  Up in our neck of the woods in New England, these questions are primarily geared towards excessive costs due to storms, especially during the winter.  This past winter was particularly annoying with bitter cold and high snowfall totals.  Many, if not all, associations ran over-budget due to the storms.  You can read more about that topic HERE.
Currently, California is suffering a severe drought and questions are … (5 comments)

fha condo approval: FHA Won’t Dictate How You Run Your Condominium - 07/23/15 04:40 AM
FHA Won’t Dictate How You Run Your Condominium
We have been working with one of our clients for many months because the Board has been reluctant to provide the necessary information to us.  It recently surfaced that they have concerns that once the condominium is approved by FHA, the Federal Government will have the power to dictate how the condominium is run.
The couple asked us to compose an email that they could present to the Board that might allay the fears of the members.  While this email is too long to post here, you can read the full version HERE.
We believe that … (6 comments)

fha condo approval: Property Manager Won’t Help With FHA Condo Approval - 07/16/15 10:36 PM
Property Manager Won’t Help With FHA Condo Approval
...because they offer the same consulting service.
We were contacted by one of our property manager referral partners about obtaining an FHA condominium project approval for the condominium in which he lives.  Over the past 5 years, we have facilitated dozens of approvals for him and the company for which he works.
Of course we told Thomas that we would be happy to handle the approval for his condominium.  As standard procedure, we forwarded a copy of our prequalification questionnaire to him to complete or have completed.  The questionnaire rules out or brings to light the … (5 comments)

fha condo approval: New Level of Scrutiny in FHA Condo Project Approvals - 07/09/15 12:01 AM
New Level of Scrutiny in FHA Condo Project Approvals
In February, we were saddened to learn of the retirement of the Chief in FHA’s Philadelphia Homeownership Center (PHOC).  We had a great working relationship with her and had met her in 2014 at the Round Table sessions in Washington DC.  A few weeks ago, she was replaced and since then, we have seen some changes in procedure and the level of scrutiny.
One of the major procedural change that has taken place is when a condominium project approval file gets rejected.  Previously when a file was rejected, we would submit the conditional documents … (8 comments)

fha condo approval: "Your Association and the FHA-What's in it for me?" with Eric Boucher - 06/21/15 10:34 PM
… (5 comments)

fha condo approval: 6-Unit Condominium Approved with FHA in 9 Days - 06/10/15 11:27 PM
6-Unit Condominium Approved with FHA in 9 Days
In February, we were contacted by a unit owner in a 6-unit condominium in Chicago.  His condominium’s FHA approval was due to expire in June.  He had read my article about FHA concentration and had some questions.  After speaking to me, he said that he wanted to hire us to handle the recertification.
Fast forward a couple of months and he retained us.  We sent him the questionnaire and requested the necessary documents.  We didn’t hear back from him for several weeks.
On May 26 when we sent a routine follow-up, he called me in a … (6 comments)

fha condo approval: But the Master Association Has Reserves - 06/02/15 07:50 AM
But the Master Association Has Reserves
A few months ago, I received a phone call from a reverse mortgage loan officer regarding an association that was recently Rejected for an FHA Condominium Approval.  He said that he has clients in the community trying to get a reverse mortgage but can’t because it is not approved with FHA.
Another company had submitted the condominium to FHA for approval but once it was Rejected, they didn’t know how to get it approved.  Although there were several reasons for the Rejection, the biggest hurdle was that the condominium did not have its own reserve account.  FHA … (20 comments)

fha condo approval: Can We Not Send that Document to FHA? - 05/29/15 02:32 AM
Can We Not Send that Document to FHA?
We are currently processing a 2-year FHA recertification for a small 6-unit condominium.  It was approved with FHA in June of 2013 so it should be a piece of cake, right?  Well, maybe not…
Our contact with the association hired us after reading a few of our blogs.  He called when he had some questions regarding FHA loan concentration limits.  Satisfied with our level of understanding of the FHA guidelines and process, he hired us to help him.
During our process of collecting the documents, we uncovered an Amendment to the Declaration filed in 2012, which … (11 comments)

fha condo approval: No Pooled Insurance Without a Master Association - 05/20/15 01:55 PM
No Pooled Insurance Without a Master Association
This may be one of those cases where FHA makes internal changes to its guidelines for condominium project approval and doesn’t tell anyone, which sometimes happens.  We who submit condominiums for FHA project approval often don’t learn about such internal changes until we submit a project that gets rejected for a reason that we have NEVER heard of.
We are working with a condominium project that shares insurance policies with a bordering condominium.  Let’s call them Condo1 and Condo2, respectively.  Both condominiums benefit from the pooled policy by paying reduced premiums.  In this case, there is … (12 comments)

fha condo approval: USDA Purchase Loans for Condo Units - 04/16/15 10:19 PM
USDA Purchase Loans for Condo Units
Probably the most under-utilized purchase loans for condominium units are those insured by the USDA.  Like the VA and FHA, the USDA Rural Development (RD) program is a home loan insurance that allows the financing of condominium units.
One of the most important criterion for use of this program is that the loans are only available in areas in which the USDA deems to be “rural”.  A rural area is one in which the population is 35,000 or less.  The USDA does not go by towns, it uses census tracts which can allow use of the RD … (13 comments)

fha condo approval: Can Our Condominium Get FHA Approved Before Construction? - 04/09/15 09:05 PM
Can Our Condominium Get FHA Approved Before Construction?
Recently, I received a call from a developer in California who asked me at what point during construction is a condominium eligible for an FHA condominium project approval.  She has a condominium approved for development by the city but ground had not been broken as of yet.  She said that she had spoken with other project consultants and FHA and had received conflicting information.
In speaking with FHA, she was told that proposed projects can be approved prior to construction and are approved at this stage quite often.  Projects do not need to be complete … (4 comments)