VA Loans Denied Because Condo Project Not On HUD’s List
I met today with a friend who is a Vice President for a national lender. We were talking about reasons why condominium projects should get approved with HUD. He threw me a curveball that I hadn’t previously heard.
He said that within the past couple of months, several VA loans have been denied by his lender because the condominium project was not on HUD’s approved condominiums list even though the project was on the VA approved condo list.
I was very surprised!
The VA has maintained an approved condominium project list just like HUD. As a mortgage loan officer back in the mid-2000’s, I only wrote one VA loan in a condominium. It was not on the VA’s approved list but I was able to get the loan done because it was on HUD’s approved list.
In 2009, when HUD released Mortgagee Letter ML09-46a/b, the VA “unpegged” itself from the HUD list and now requires condo projects to get on its approval list before VA loans are allowed in the project.
So, one would think that if the project is on the VA list then a VA loan in the project is acceptable, right?
Nope.
This lender’s investors are not buying VA loans in condo projects that are not approved with HUD.
The reasoning behind it is: what is the resale-ability of the unit if the lender acquired the property via foreclosure? Without being on the HUD approved condos list, it will be more difficult to sell.
This is the level of impact that a condo project approval with HUD has on the sale-ability of units in a project and why it is SO important for condominium projects to get approved with HUD.
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