This is a great article on Condo loans and there is some great resources in here for people considering buying a condo or a town home.
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Last year FHA announced that they will be beginning a condo recertification process for condos that were approved prior to October 1, 2008, requiring that they are re-approved on or before December 7, 2010. Well its hard to believe, but December 7th is almost here, and there are very few condos that have been re-approved. Welcome "Condo Judgment Day!"
From FHA: "New FHA case numbers will not be assigned for those projects where the project approval has expired and the project has not been recertified or reapproved prior to the project expiration date." This was all initially announced in the FHA mortgagee letter issued November 6th 2009-46 B.
Bottom line, No case numbers = NO FHA loans!
My understanding is that the approval process can take 30-45 days. 45 days from now is past 12/7/10! I expect FHA will become more busy as more people become aware of the issue.
This is of major concern to both people looking to buy condos and Realtors who have condos as current listings (or plan to have any in the foreseeable future) not to mention the impact to the affected condo owners with respect to property values.
See for yourself:
- Load up the FHA approved condo list: https://entp.hud.gov/idapp/html/condlook.cfm
- Select your state, and enter in a zip code, click "Send."
I'm going to use Maryland and zip code 21044 as an example. Out of the 33 records, currently only 2 of them will be approved for new case numbers on 12/7/2010! This in turn means NO FHA buyers will be approved on ANY of the 31 other condos.
What to do?
First, the whole condo approval process is time consuming and it is not clear who is responsible for it. There are a number of at risk parties who would all like the process to be completed, this includes: owners, Realtors, lenders, buyers, HOA's, etc. My understanding is a lot of the lenders are not comfortable making certifications for such things as:
"the Lender has no knowledge of circumstances or conditions that might have an adverse effect on the project or cause a mortgage secured by a unit in the project to become delinquent (including but not limited to: defects in construction; substantial disputes or dissatisfaction among unit owners about the operation of the project or the owner's association; and disputes concerning unit owners; rights privileges, and obligations")
The lender is supposed certifying about defects in construction and dissatisfaction among unit owners? Seriously? But I have heard (yet to see a list) that some lenders to have departments that handle condo approvals.
Potentially the easiest would be to encourage owners to get their HOA's / Management Companies to take care of it as they have access to a majority of the required items. The good news is that some projects only require a recertification, while others require a new full approval. In the case of a full approval there will likely be attorney fees or other related fees with obtaining some or all of the information.
- If project initially approved on or after January 1, 2000, then the project is eligible for the recertification process.
- The recertification process is not as involved as the full condo project approval. For the recertification follow the instructions at http://www.hud.gov/offices/hsg/sfh/condo/recertification.doc
- If project initially approved prior to January 1, 2000, full project approval is required.
- For full approval see mortgagee letter issued November 6th 2009-46 B
- You can find FHA's FAQ at http://www.hud.gov/offices/hsg/sfh/condo/faqs_condo.pdf
- According to the FAQ, HRAP processing can be done by a Lender, Developer, HOA or their authorized representative and should submit the request to the appropriate HOC.
FHA Homeownership Centers by State http://www.hud.gov/offices/hsg/sfh/hoc/hsghocs.cfm
The good news is that FHA does have a phone number with seemingly knowledgeable staff who may be able to help out (800) CALL-FHA or (800) 225-5342. If anyone has any more information or insight I would be glad to hear, maybe I am jumping the gun and some new guidance will come out from FHA on how to deal with this issue, I sure hope so...
Nick Pakulla / Loan Officer / First Place Bank / 15400 Calhoun Drive, Rockville MD 20855 / 301.585.7283
Call Me Direct: 301.585.RATE (7283)