FHA and the new Condo Rules for California, Contra Costa, Alameda, Solano Counties
You may have heard that as of 2/1/10 new FHA and the new Condo Rules became effective. So think of it as there is a new sheriff in town as far as condo approvals are concerned. You can no longer do a spot approval, your condo complex has to be on a list and adhere to FHA and the new Condo Rules
For most this means attorney fees of upwards of $2,000, time delays, and lots of documents. Envoy Mortgage has streamlined this process regarding FHA and the new Condo Rules for our clients by doing approvals under the DELRAP approval process. This means that we take on the responsibility for the project, take care of the approvals and do it in a timely basis for your clients. So your client that is working with an Envoy Mortgage mortgage professional throughout the United States working under FHA and the new Condo Rules has just gotten easier.
You and your client should be prepared to have a delay in the closing of your escrow or in other words write the contract for longer than 30 days. Should you not be dealing with Envoy Mortgage and regarding FHA and the new Condo Rules you can expect your escrow to be about 60+ days.
Our underwriters have been trained on FHA and the new Condo Rules and are fully compliant to approve the complex.
What does all of the above mean for the sale of condos? For you as the consumer? For you as the seller? The simple answer is a lot.
For the sale of condos - it is anticipated that the prices will decrease, financing structure may change, and the numbers of units sold will decline. One way to offset this is by a) making sure that your condo complex is on the FNMA or FHA list and b) if not, work with the homeowner's assn and the management company to start the process to get on the list. Items that you should be aware of that will help to get you approved are having reserves, high owner occupancy, and no litigation.
For the consumer - the problem is multi-fold. Most of the first time homebuyer loans today are FHA. Without an approved complex, you will not be able to get an FHA loan. That means goodbye to 3.5% downpayment. If the complex can't be approved you may end up putting more down, having a very small selection of loans, looking to other property and probably paying higher rates. So ask about the complex before writing a contract. Envoy Mortgage has a process in place to get complexes that qualify approved. We are one of the few mortgage bankers that does.
The seller - their issue is multi-fold also. Their issues range from 1) not being able to sell the property, 2) having to pay for the complex to be approved (this could be upwards of $2,000 in attorney fees), 3) having to do a seller carry/financing, 4) reduced price.
So with these changes everyone involved in the transaction is being impacted. Look before you write an offer.
Check out www.peggyvalley.com or my blog at mortgages.peggyvalley.com for additional changes in the industry.