Fewer Condominium Associations FHA Eligible

By
Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI

Fewer Condominium Associations FHA Eligible   

 
 
     Recently, an agent that is a referral partner of mine
http://www.genemundt.com
contacted me regarding a listing of his that was a Condominium.  He had received an offer on the listing and the offer called for FHA financing.
 
     This agent posed a question to me.  It was, "Can this condo development still go FHA and FHA financing?"
 
     After doing some research on the property, I gave him my answer.  It was bad news ... "No".  Unfortunately, the Association's FHA Approval had expired well over 2 years ago.

     My answer obviously frustrated this agent as he asked, "Why do so many of these Condo Associations let their FHA approvals expire?" 

     That's a great question.  There are several reasons this occurs:
  • The recent downturn in the real estate market left many homeowners (including Condo owners) "underwater" and unable to sell.  That lead to Short Sales, Foreclosures, and many homeowners renting-out their Condo Units (where and when allowed).  Note:  Too many Rented Units may impact a project's marketability and Financing Approval Status.
  • The downturn in the economy left many Condo Owners unable to pay their monthly HOA Dues in a timely and consistent fashion.  Standards in the Mortgage Industry require that no more than 15% of the total number of Condo Units can be delinquent (60 days) on their payments to the Association.
  • Because of the above items (1 & 2), FHA makes Condo Associations file for renewals, or updated approvals, every two years.  Much can change in 2 years.  It definitely has in the past 5 or 6 years.
  • Those Associations that once were approved (like the Condo my referral partner was asking about above), have become ineligible for FHA financing, as their approvals have expired.    
  • Association Board of Officers, or its Management Company, decided NOT to re-apply, don't know of the requirement, or know they simply can no longer qualify.  There are even some that just won't take the personal responsibility for the reporting of the Project Certification.


     Why?
    

https://1609956119.secure-loancenter.com/FreeConsult.aspx

     It could be that the Association's finances have turned for the worse (too many delinquent Unit Owners, too many Renters (over 50% makes it ineligible).  

     Or the Association simply didn't complete the renewal needed to re-certify the status of the Development.


     How did the deal I spoke of above work out?     Without FHA Financing remaining as an option, how was the transaction to move forward successfully? 

     I suggested to my referral partner that VA Financing was a viable route for financing, as the Condo Development was still VA Approved ... and the Buyer was a Veteran.  Yes, FHA and VA Condo Approval processes are separate.  The transaction could move forward, but not simply.

     Remember, I was not the Buyer's LO, I was just acting as a "consultant" for the Listing Agent, my referral partner.  This agent took my suggestion regarding VA Financing back to the original LO.  He in-turn questioned where I got my info, as he didn't think the property was VA Approved.

     I assured my agent that it was indeed VA approved.  I then printed and sent proof of the VA approval status to my agent.  He presented the proof to the Buyer's agent and his  "recommended Lender".  The original LO actually called and thanked me for saving the deal.

     My question to you is this:  Which Mortgage Lender would you want to do business with?  The one that gave up on his clients ... or the one that kept digging until he found a solution that enabled a sale/purchase to close successfully?

     My referral partner is of the opinion that he recommends and works with the right Mortgage Lender.  


http://www.genemundt.com/ContactUs.aspx


     

     *  If you're hoping to Buy, Build, or Refinance a home in the Chicagoland area, contact me today.  I'll put my 37 years of Mortgage experience and expertise hard to work on your behalf.
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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Michelle Cherie CarrCrowe Just Call...408-252-8900 10/26/2014 08:28 AM
  2. Cheryl Ritchie 10/26/2014 12:22 PM
Topic:
Lending / Financial
Location:
Illinois Will County Joliet
Groups:
Realtors®
Chicago Area Real Estate BUZZ!
1st Time Buyers
Condo Specialists
Bananatude
Tags:
condominiums
buying a home
mortgage lender
va financing
fha financing
buying a condominium
fha condo approval process
va condo approval process

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Rainmaker
1,239,677
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

Bill Roberts ... And I you!  Thanks for the kind words ... and maybe one day in the future??

Gene

Oct 25, 2014 12:46 AM #38
Rainmaker
1,560,731
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Smaller complexes are particularly prone to loss when there's a dead-beat owner.  The FHA offers a 3.5% down payment loan, and that's not a lot of skin in the game, and buyers can rack up huge HOA fees when they are delinquent.  While it does hamper some good buyers, it's a call HOA's need to make.

Oct 25, 2014 08:15 AM #39
Rainmaker
607,829
Claude Labbe
Real Living | At Home - Washington, DC
Realty for Your Busy Life

Gene, not all lending officer's are created equal.

Before any listing appointment with a condo owner...yup, the 1st call is to my lender best-buddy to understand what the financing options will be for the buyers.  Sometimes, I've suggested to the seller that we delay by a few months until the association can become re-certified. 

In the greater Washington DC area...VA loans are a significant factor, and so, I always like when then are a tool that can be suggested to the buyers.

Oct 25, 2014 02:35 PM #40
Ambassador
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Richard Iarossi
Coldwell Banker Residential Brokerage - Crofton, MD
Crofton MD Real Estate, Annapolis MD Real Estate

Gene,

I see it around here all the time. Once it starts, it's a never ending spiral downward for that association.

Rich

Oct 25, 2014 08:55 PM #41
Rainmaker
1,554,324
Sandy Padula and Norm Padula, JD, GRI
HomeSmart Realty West & Geneva Financial, Llc. - Carlsbad, CA
Presence, Persistence & Perseverance

Gene: All true information here in your blog post. One of the first questions we ask our mortgage brokers when discussing the possibility of financing a particular complex for a buyer is, "Can it be financed with FHA?"

Oct 26, 2014 01:34 AM #42
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Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Gene,

As far as I remember, FHA will also shy away if there are too many loans by them in any particular condo.

Oct 26, 2014 08:40 AM #43
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Michelle Cherie CarrCrowe Just Call...408-252-8900
Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty - San Jose, CA
Family Helping Families Buy & Sell Homes 40+ Years

Fewer complexes have FHA approval-and it can be a key point to sell them.

Oct 26, 2014 10:15 AM #44
Rainmaker
1,367,484
Cheryl Ritchie
RE/MAX Leading Edge www.GoldenResults.com - Huntingtown, MD
Southern Maryland 301-980-7566

You definitely deserve a reblog on this one! Thanks for the excellent tips! 

Oct 26, 2014 12:23 PM #45
Rainmaker
1,239,677
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

Carla Muss-Jacobs, Principal Broker/Owner ... There's definitely no definitive right or wrong to this issue.  As usual, the bugger is in the details .. and as you mention deciding to not have FHA approval can be the right move in some cases.

Claude Labbe ... You're absolutely right.  As in most things, there are those that excel in their jobs and others that do not.  Very glad that you have found a lender "buddy" that you can rely on for good advice and service.  Exactly how it should be ...

Gene

Oct 27, 2014 02:56 AM #46
Rainmaker
1,239,677
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

Richard Iarossi ... It sure can see that way.  Best to remain on top of things consistently so an entire complex is not put in that position ...

@Sandy Padula and Norm Padula:  Wise action to take ... knowing all options available to Buyers and Sellers certainly widens the pool of offers ...

Gene

Oct 27, 2014 02:59 AM #47
Rainmaker
1,239,677
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

Jon Zolsky, Daytona Beach, FL ... that has not been an experience I've run across.  Would have to do some homework on that ...

Michelle Carr-Crowe-Selling Silicon Valley Homes in Top Schools San Jose, Cupertino, Saratoga, Palo Alto-Just Call 408-252-8900 ... definitely true!  Anything that limits the number of potential buyers has consequences ...

Gene

Oct 27, 2014 03:01 AM #48
Rainmaker
1,239,677
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

Cheryl Ritchie ... thank you!  Hope it proves beneficial to your readers ...

Gene

Oct 27, 2014 03:02 AM #49
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Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Gene - Actually, I took it from their 95-page Condominium Project Approval and Processing Guide. On page 44 in 3.6 FHA Concentration it says:

"FHA will not insure any mortgages in an approved project if 50 percent or more of the units are FHA-insured."

If you want me to send you the Guide, shoot me your email address.

Oct 27, 2014 12:52 PM #50
Rainmaker
350,532
ReadySetLoan Condo Approval Team
ReadySetLoan Condo Team LLC - South Windsor, CT
The FHA/VA Condo Project Approval Specialists

Great article Gene - and a nice call with the switch to VA.  (The LO should have investigated this option first as it is the best loan program out there, in my opinion).  Many associations don't understand how much they are reducing their buyer pool by not being approved with FHA.

I read an article a few weeks ago by Cindy Jones where she talked about a unit taking 321 days to sell.  It missed out on 5 FHA buyers because it wasn't FHA-approved.

To Jon Zolsky, Daytona Beach, FL : your quote is only partially accurate.  FHA will allow up to 100% FHA concentration in certain projects (refer to Section 3.6 of the Guide, page 45).  Maximum FHA concentration also doesn't apply to FHA-FHA Streamlined refinances.

Oct 28, 2014 06:23 AM #51
Rainmaker
1,239,677
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 Boucher ... greatly appreciate you adding your insight and info for Jon Zolsky, Daytona Beach, FL with his question.  Thanks much ...

And as far as missed opportunities, I agree.  Too many complexes are sitting on their hands and far-sighted in this regard ... especially those that would draw first-time buyers.  Appreciate the thumbs-up on the VA program and info ...

Gene

Oct 28, 2014 08:23 AM #52
Rainmaker
1,239,677
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

Jon Zolsky, Daytona Beach, FL ... Appreciate the offer, but I have access to the info.  I hope you had a chance to see Eric Boucher's input above ... and it answers your questions more fully.  Thanks for taking the time to write again!

Gene

Oct 28, 2014 08:25 AM #53
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Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Gene and Eric - went back to the guide, and saw it, you are right. I have not read the whole guide, just remembered seeing it, hence is was only partially right :)

Oct 28, 2014 10:25 AM #54
Rainmaker
1,239,677
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

So glad that Eric added his knowledge and expertise here, Jon Zolsky, Daytona Beach, FL ... we both (all) gained!

Gene

Oct 28, 2014 10:46 AM #55
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Your referral partner is correct, Gene!  I hope that HUD will alter the requirements, and that soon the new replacement guidelines for the 'spot approvals' we could once get will allow us to help more buyers finance condos with FHA loans.

Oct 30, 2014 10:52 AM #56
Rainmaker
1,239,677
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

Time will tell whether we return to 'spot approvals', John Meussner ... I'm not holding my breath.  Those in a position to complete the documentation needed for approval at condo complexes have to step-up and begin to see the merit in making the effort. 

Gene

Oct 30, 2014 11:32 AM #57
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Rainmaker
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi

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