As FHA's current overhaul on backing loans for condominiums looms, I'm asking to myself "what next?" and wondering how the overhaul will affect our local Seattle Metro area's condo communities. In a tough market, in a time when we are still seeing values decline, owners slip into short sale, foreclosure and misery, this might be an unwelcome change. Not just for our area but across the nation. As FHA revamps it's lending practices, adds a .5% requirement to buyer's down payments, and is also removing many approved lenders from their roster (a good thing!) things will get much more difficult in the realm of condo sales. Therefore, we need to become "new" experts in condominiums. We need to commit to due diligence, and fully understand the new processes that will soon be implemented so we can smoothly and successfully guide our buyers and sellers down the path of transferring ownership between parties.

I think it is wise to have condo communities "reapply" for approval status, although I worry that the re-approval process that will be happening across the nation will be greater than FHA's resources will be able to bear. And as such, I can only assume that many deals over the next few months... those that are FHA based financing of course will be burdened by much longer, convoluted closings while the kinks get worked out. Not to mention the denials they undoubtedly will be garnering out. It is unfortunate that this is taking place right now but I do appreciate the fact that the spot approvals will be going away and it will be a "this or that", "yes or no" mentality with which condominium communities will qualify. One perplexing thing about it is how rigid they will stick to the requirement for an "updated reserve study" performed within 12 months of application.

I'm hoping that the change also gets rid of innaccurate information posted on the MLS from listing agents being lazy and checking the box stating that a condo is "FHA approved" because they saw it on another agents listing sheet for a current or closed transaction in the community. I don't know how many agents have said that was their verification process when I pressed the issue to find out how they knew it was truly FHA approved. Ummm, that, my friend, IS NOT doing your due diligence... or your job, nor is it properly representing your client!

To make things easier, here's a tip... HUD has a revamped web site. No, really!!... check it out! www.hud.gov that leads you (very easily now) to the page where you can search for the condominium project (go to HUD.gov, click on the Resources Tab, then look for HUD Approved Condominium Projects in that tabs drop down). I will admit that the page it brings you to still sucks and is archaic in usability. Hopefully they will freshen it up and make it more user friendly as they've done with the main screen. None the less, I'm glad to see that we will have more accurate information on our MLS of which properties are HUD/FHA approved, and which are not. I think the new requirements are detailed more on their Mortgagee Letter ML 2009-01

So in a nutshell, I believe two things... change is good, but sometimes change is painful. All we can do is look to the future, educate ourselves, and do our best at navigating the new world of FHA for our clients!