FHA Condo Approvals – Subjectivity in Project Approvals

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FHA Condo Approvals – Subjectivity in Project Approvals


In working with HUD over the years, I have noticed quite a range of strictness among the project reviewers.  In fact, there is one project reviewer in a Homeownership Center (HOC) with whom I hope my files are not placed!

Different reviewers have different interpretations of HUD’s guidelines.  Some of the requirements for project approval are inherently subjective, such as the financial viability.  It doesn’t say that if a project has so much in reserves and posts a certain profit that it is viable.  It also doesn’t say that if the HOA shows a loss and has so much in reserves that it is not acceptable.

Some of the reviewers are not as critical of pending special assessments, outstanding loans to the association or pending litigation while other scrutinize the heck out of these.

One of the more frustrating examples of this deals with Flood Maps.  I worked with one project where the initial flood map shows a stream running through where a building now stands.  During construction of the project, the stream was rerouted around the buildings but the flood map didn’t show this.

About 10 years ago, to avoid paying for flood insurance, a Letter of Map Amendment (LOMA) was sought from FEMA and was granted showing that the stream had been moved.  The Special Flood Hazard Area due to the stream still existed but it did not intersect any of the buildings.

The project reviewer Rejected the submission for approval and placed a requirement that the project must get flood insurance – the entire project – to be paid by the Association.  He claims that if a SFHA intersects any part of the project’s plat map, the entire project must get flood insurance.

The only way to remove this requirement was to request a LOMA from FEMA that removes all of the buildings from the Special Flood Hazard Area (even though it was evident from the map that none were in a SFHA.)

So, that’s what I did.  It took a couple of months but FEMA issued the LOMA removing all of the structures from the SFHA and the project reviewer removed the flood insurance requirement.

I am working with another project consisting of a converted mill building and several other buildings of townhouses that were built during the conversion of the mill.  The mill building is in a Special Flood Hazard Area and the HOA pays for the flood insurance for it.  The other buildings are outside of the SFHA and do not have flood insurance.

The project reviewer is asking that evidence be provided demonstrating that the other units are not in a SFHA.  She did not require that the entire project get flood insurance as did the reviewer in the first example.  As it turns out, the HOA was already in the process of doing this.

And still a third example of this is one that was approved recently.  It is evident on the flood map that Flood Zone AE exists on the project’s plat map but it is clear that it doesn’t intersect any buildings.  It was approved without the reviewer requesting any further information.  If the reviewer in the first example had the file, he would have required that the entire project get flood insurance or to get a LOMA from FEMA.

With these discrepancies, you can certainly understand why I sometimes cross my fingers when I send in submissions!

Posted by

The Condominium Project Approval Team at ReadySetLoan is dedicated to helping condominium projects across the nation to obtain their approvals with FHA and the VA or become recertified with FHA.  We have assisted nearly 200 condominiums and we can help your association.


ReadySetLoan is an active member of the Connecticut and New England chapters of the Community Associations Institute (CAI) and is a frequent contributor to Common Interest Magazine as an expert in FHA/VA condominium project approvals.


Please contact us with any questions regarding FHA or VA condominium project approvals.  You can email me at askeric@readysetloan.com or call me at 404-433-4565. I will be happy to answer any of your questions.


FHA/VA Condo Approval Specialist

404-433-4565 Cell Phone

860-644-3772 Fax Phone

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 Check out our article in Common Interest magazine on page 19!

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Re-Blogged 1 time:

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  1. Lenn Harley 07/30/2013 07:56 AM
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The FHA Mortgage Group
Condo Specialists
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Raymond Denton
Academy Mortgage Corporation - Irvine, CA
Simple Man

I didn't know your Profession existed, Eric.  While at Bank of America, I attened all the courses on condo approval, because I was the one that had to interact with the condo association, and submit the paperwork to Bank of America.  It was painful.

Jul 30, 2013 01:03 AM #4
Brian Sharkey
SharkeyRE LLC - Port St Lucie, FL
SharkeyRE - #SouthFloridaBroker

Great post, I will be sharing this with my clients.  Thanks for explaining this.

Jul 30, 2013 01:20 AM #5
Debra Hight
Coldwell Banker United, Realtors - Houston, TX
Debra Hight

Great information Eric. As an FHA Condo Approval Specialist you certainly have your work cut out for you. 

Jul 30, 2013 01:47 AM #6
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Eric, one of the Sales Managers here lives in a Condo Complex and assisted them on getting the complex FHA Certified.  She told me it felt like she was underwriting a loan, they were so nit picky :)

Jul 30, 2013 02:02 AM #7
Michele Peterson
Sellstate Realty First - Roseville, CA
Sellstate Realty First

Eric is it true that you have to do the entire complex and not just one unit?  We have 98% of our Condo complexes in this area are no longer FHA approved.  There are 2 left and both very, very expensive and overpriced.

Most of the HOA's here will not work with getting the community FHA approved again because of the HOA delinquency rate.

Any suggestions?


Jul 30, 2013 02:07 AM #8
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Eric:  FHA ... condos ... flood maps!  Words when seen or uttered together can make a Lender sweat, no doubt about it.  I've found with my transactions that typically, issues and problems can be tackled and successfully addressed ... with time.  TIME being a very key word.  It typically takes time to tackle those nit picky items that arise.  Love that you're educating regarding this sometimes lesser-known area of transacting and financing ... thank you.  Congrats on the well-deserved Feature ...


Jul 30, 2013 02:10 AM #9
Harry F. D'Elia
Real Estate and Beyond, LLC - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

FHA approvals for condos is a lot of work--great work!

Jul 30, 2013 02:27 AM #10
Kim & Kristine Halverson
www.LiveWorkSiliconBeach.com, Santa Monica Real Estate :) - Santa Monica, CA

These are great loans for buyers and condo building.  Unfortunately, we don't have a single building that is FHA approved in Santa Monica & possibly the entire westside.  Too bad.  Great job for supporting these loans they can be cumbersome!

Jul 30, 2013 02:42 AM #11
ReadySetLoan Condo Approval Team
ReadySetLoan Condo Team LLC - South Windsor, CT
The FHA/VA Condo Project Approval Specialists

Debra, George and Gene: getting a condo project approved is VERY much like getting a loan approved with a lender.  My 10 years in the mortgage business helped make this a smooth transition.  I have also found that often, the project reviewers at HUD have some leeway in approving files which is similar to a loan underwriter. But as Gene says, it can take time.

Michele: as in the article, I have seen both ends of the spectrum with flood insurance and it really depends on the project reviewer.  I have also worked in helping projects get LOMAs from FEMA to remove buildings/units from Flood Zones.  As far as delinquency, in September 2012, HUD provided temporary guidance allowing up to 15% of the units to be 60 days or more delinquent.

Thank you for your comments all!

Jul 30, 2013 02:44 AM #12
Edward & Celia Maddox
The Celtic Connection Realty - Queen Creek, AZ

You are right on about this FHA subject.  Thanks for sharing with others.

Jul 30, 2013 03:35 AM #13
Team Honeycutt
Allen Tate - Concord, NC

Thanks for your explanation. I have a lot of confusion in my mind about the requirements that you shared information about with us.


Jul 30, 2013 04:59 AM #14
Linda De Fusco
The De Fusco TEAM Keller Williams Arizona Realty - Scottsdale, AZ
The Arizona Rainmaker

As the world turns, so does the government sanctioned employees...interpretations ruin many an application.


Jul 30, 2013 10:57 AM #15
Jimmy Faulkner
Florida. Homes Realty & Mortgage - Wantagh, NY
The Best Of St. Augustine

Eric: Iput you cell # and email. I have 30 years in real estate and 20 years in mortgages and I know how difficult FHA's are to do. I gave up the mortgage business and just do real estate. Great blog and thank you!  JIm

Jul 30, 2013 11:47 AM #16
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

Eric -- this is a very informative post. I had no idea that the FHA approvals could be so subjective.  This is very troublesome indeed.  Also, since the underwriters require even more criteria be met for FHA financing, one would think these would be factors as well.. 

Jul 30, 2013 11:55 AM #17
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC


Wow this is really interesting.

Good luck and success.

Lou Ludwig

Jul 30, 2013 12:10 PM #18
Susan Rodriguez

Great information, thank you!


Jul 31, 2013 12:27 AM #19
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Is it also true for mortgage underwriters? I have seen underwriters from the same institution interpret guidelines differently, so your post makes perfect sense.

Jul 31, 2013 11:28 AM #21
Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

Eric, I know when I have gone throught the approval process I know it wont be handled the same each time. I really depend on the lender to help guide me through it. BTW, thank you so much for the re-blog the other day.

Aug 01, 2013 12:07 AM #22
Chandler Real Estate Liz Harris, MBA
Liz Harris Realty - Chandler, AZ

Fantastic post today, really enjoyed the read, I'm gearing up for another exciting weekend, hope you are as well. Have a good one.  Liz in Chandler

Jul 10, 2014 10:19 AM #23
ReadySetLoan Condo Approval Team
ReadySetLoan Condo Team LLC - South Windsor, CT
The FHA/VA Condo Project Approval Specialists

Thank you Liz.  This is actually an old article and I fixed the meta tags on it today so it ended up posting as new

Jul 11, 2014 12:42 AM #24
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