FHA Condo Approvals – Another Project Approved
So far this year, every project that I have submitted to HUD has been Approved on the first try. While I am extremely proud of this, by no means do I expect that they will all go this way.
One of the reasons for this rate of success is how thoroughly the package is scrubbed prior to sending it to HUD.
I’ll give an example of one of these from Manchester, CT, and the timeframe involved.
I was initially hired by the condominium project in June 2011. Upon receiving the required documents, it was clear that the project was not approvable due to the budget, that two of the buildings resided in FEMA Flood Zone AE according to the flood map, the insurance was insufficient and they were in the process of working on a Special Assessment for excessive expenses due to the wild winter early in 2011.
So we went to work.
Further investigation determined that the FEMA flood map was revised. The project had hired engineers to do survey work and they sent the data to FEMA, which later issued a LOMA (Letter of Map Amendment) removing the two buildings from Flood Zone AE. I took pictures of the buildings in reference to the others to further demonstrate to HUD that the two buildings mentioned in the LOMA were the same as those located in Zone AE on the flood map. Problem solved.
The insurance coverage needed to be increased from $200,000 to $250,000 for the Fidelity/Employee Dishonesty policy. This coverage needs to equal or exceed the total of 3 month’s aggregate collected common fees plus the amount held in the reserve account(s). This was an easy fix and the increase in annual premium was less than $100.
While the Association decided how to handle the added expenses from the excess snow and ice damming, we had to tackle a bigger issue. The budget did not include a line item whereby 10% of the collected common charges are transferred to the reserve account(s).
Prior to June 30, 2011, HUD was a little more lenient when it came to transferring funds to the reserve account. I had helped several projects to get Approved with HUD whose budgets did not meet this requirement BUT did have substantial funds in the reserve account. Upon releasing the Condominium Approval and Processing Guide on 6/30/2011, HUD required strict adherence to this requirement.
I examined the budget and made several suggestions as how to modify it to include this 10% contribution to reserves without the need to raise the common fees. The Board opted for one of my suggestions but in order to change the budget after it had been ratified, it needed to go to Association vote. This took a couple of months.
Once the new budget and Special Assessment were approved, I assembled the submission package and sent it to HUD.
One month later it was Approved without HUD requesting further documentation from us.
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