This week totally unannounced FHA made some nightmarish changes to their approved condo list. For decades FHA has approved condo complexes around the country and FHA kept a list of all their approved condo projects on-line. FHA announced some major changes last fall; then, after great outcry they decided to delay the changes until end of 2010. They said we could continue to use their approved condo list for the remainder of 2010. In the meantime they would begin assembling a new approval list for condos.
Well this week without any notice or Mortgagee Letter they said no more. Now we can't use the "old" approved list anymore; we must use the new list. Two problems with the new list: first many complexes are not on that list yet and second some condo complexes that should be on the new list did not get transferred correctly by FHA.
For example, a client who just went under contract to purchase a condo in Parker Colorado, his entire complex was approved on the old list; but the new list only has building #4 approved and the other 14 buildings are not approved. It appears to be a technical or software glitch by FHA. So we called FHA and here is their response in a nutshell: "we don't care, it's your problem." That's what we as lenders have had to deal with at FHA and HUD for the last year.
Here are the ramifications-
•· If the condo is not approved by FHA, we can't get a FHA Case Number, which means a FHA loan is NOT possible. This is a nationwide systemic problem for every bank and every lender.
•· We or the HOA must re-approve each complex (as needed) with FHA. The complex must be on the new FHA approved list.
•· How widespread is the problem? We don't know for sure; but Barb Weade, (aka "The Denver Condo Queen"), says it is a nightmare and they are swamped already with desperate calls for help.
•· The HOA or us will need to hire Barb Weade for her help in getting these condo projects re-approved. Currently, Barb charges $750 for this that needs to be paid in advance.
•· Then, after Barb has the paperwork together and it looks good she sends it to FHA for their approval.
•· All of this will take weeks or months most likely to get done. First, because there are very few Barb Weades out there, in fact, we don't know of another one in Denver. Second, because there may be thousands of complexes that need to be re-approved right away.
So, What To Do?
•· If you have a client buying or selling a condo you better check FHA's list again. And make sure your phase and building is included on the NEW approval list.
•· Realize this will kill deals and will hurt consumers!
•· Call, email, and fax our Representatives and Senators in D.C. to let them know of this mess. In fact, I believe people should be fired for this.
•· Let NAR and every Realtor you know about this problem. As I have said many times NAR has a much louder voice than we do.