FHA Condo Approvals – Impatience Does Not Help Anyone
I felt the need to write about this as I have received several requests this week to “submit what you have to HUD” despite my recommendations to the contrary.
Over the past 20 months, 52% of the condominium project approval packages that I have sent to HUD have been approved upon the initial submission. I am very proud of this statistic because when I was a mortgage loan officer, only 2 of my hundreds of loan submissions were approved by the lender the first try.
The primary value of my service, as I see it, is to provide insight as to what is acceptable to HUD and what is not and to provide suggestions on how to rectify potential issues. This is in addition to making sure that all of the proper documentation and information is included in the submission package.
Compiling a file for a condominium project approval with HUD is much like that of a mortgage loan file. The basic information and paperwork is collected and reviewed. Sometimes the initial review warrants the need for more information and paperwork. And so on…
This can sometimes lead to impatience by the HOA or the management company. For example:
· Last year’s income/expense statement shows a $42,000 loss. This will never fly with HUD; it shows that the project mishandles money. I am asking for detailed information and a letter of explanation regarding this loss. It is possible that the statement contains improperly accounted monies leading to an erroneous loss. I was asked to submit the package to HUD to see what the reviewer says.
· Employee Dishonesty insurance policy is too low. I wrote about the requirements in a previous article. I notified the Treasurer (my primary contact) and she said that the Board did not want to increase it without being told by HUD. The project was Rejected and this insurance needed to be increased by the amount that I recommended.
· Restated governing documents should be “good enough”. In my experience with HUD, when a condominium project restates its Declaration and By-laws, HUD still requires submission of the original Declaration, by-laws and all amendments recorded thereto. I notified the client of this and they wished for me to submit the package to HUD anyways.
The major problem with all of these is that the associations are running on a limited timeframe. All of them have unit owners who are wishing to refinance or sell their units. By submitting an incomplete file, it is delaying the process and that doesn’t help anyone.
Image courtesy of Stuart Miles/freedigitalphotos.net
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