Delayed until November 2, 2009, FHA is changing the way condo projects will be approved. Under the new rules, there will still be an "FHA Approved" list, however all prior approvals will be invalid unless approved on or after October 1, 2008. For condo projects not on this list, FHA will start from scratch approving a condo by one of the following two methods:

Note: The "Spot Approval" process will be eliminated and replaced by these two methods.

DELRAP (Direct Endorsement Lender Review and Approval Process) gives an Underwriter the power to approve a condo locally. The approved lender provides HOA documentation (CCRs, Budget, HOA Management Company Questionnaire, Insurance, Reserves, etc.). The Underwriter reviews the documents and makes a decision. The lending community is hopeful that this process may be easier than in the past.

HRAP (HUD Review and Approval Process) utilities the same documentation as DELRAP but puts the approval process on HUD (Department of Housing and Urban Development). This may prove to be very time consuming.

Once a unit is approved in the project, we believe the project will be added to the FHA approved list. Going forward, all projects will require recertification every two years.

In order for a project to be approved, the following guidelines (among others) must be met:

1. At least 50% must be owner-occupied
2. No more than 10% can be owned by a single investor
3. No more than 25% of the total floor space can be "commercial"
4. No more than 15% of the units can be more than 30 days behind on their association dues
5. Project must be covered by hazard and liability insurance
6. There must be adequate "reserves" to cover contingencies

If you can't sleep tonight, you can download the entire Mortgage Letter 2009-19 document from the HUD site at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-19ml.doc

Make it a great day!

Seven Gables Real Estate

License #01727426

www.TheOCExperts.com

www.OCMarketUpdate.com (blog)

Direct: 714 276-7006

Fax: 714 917-2293