FHA Condo Approvals – Update on Appendix A: Project Certification
Last month, HUD released Mortgagee Letter ML2012-18 which provided updated guidance on condominium approvals. Among the updates was a new version of Appendix A, otherwise known as the “Project Certification”.
When I attended the HUD seminar in Philadelphia in September 2011, the original version of Appendix A had recently been made effective. Here, the speakers from HUD noted that they were working on a new version of the form. Last month, the new form was released and was to be effective October 13, 2012.
Last Friday, October 12, HUD issued an email notification that updates the Project Certification form. It removed Item #2 on the certification which read “I have reviewed the condominium project application and in reliance upon advice given by my attorney, it meets all State and local condominium laws”.
I have had customers of mine balk at this phrasing over the past few weeks and I can only imagine how much negative feedback HUD received over this language. Needless to say they are quite pleased with the change.
At the seminar in Philadelphia last September, HUD told us that the primary purpose of this form was to hold someone accountable for the information and paperwork that was being supplied to it if they suspected that fraud was involved. In recent years, HUD had required an “attorney opinion letter”, which it no longer does.
In this regard, HUD is simply looking for a contact point that can vouch for the information being supplied as a basis for approval. They mentioned that HUD infrequently investigates individuals unless they suspect that blatant fraud is involved.
Examples aside from lying on the application or providing false documents, such fraud could include not disclosing an upcoming Special Assessment, lawsuit or withholding information regarding structural or financial defects within the condominium project.
In all, this modification adheres to HUD’s “common sense” approach to condominium approvals while still placing emphasis on mitigating its risk.