FHA is eliminated the Spot Loan Approval

Good news on the FHA front the Spot Loan Approval process is being eliminated. The processes are being streamlined to allow for uncomplicated condominium project approvals eliminating the need to approve units on a "spot loan" basis. Begining on December 7,2009.

FHA is implementing a new approval process for Condominium Projects. FHA is going to allow the lenders to determine project eligibility, review project documentation and certify to compliance FHA requirements. This is much the same process lenders certify compliance when FNMA or FHLMC loans are involved. FHA will continue to maintain a list of Approved Condominiums on their website for ease of determining approval after the lenders certify and approve.

Until now when a lender did a spot approval of a condominium project, it was only for that particular real estate transaction. The entire project was not deemed FHA approved because of the spot approval. Now it will be a fully approved project, entered on the FHA website and any lender may now fund FHA loans in that development.

If a project is listed on the FHA website as Rejected or Withdrawn, the only approval process allowed will be submitting all documents to FHA for project approval. Lenders are not permitted to over turn FHA rejected or withdrawn condominium projects.

Condominium project approvals will expire after two years from the date it has been placed on the list of approved condominiums. FHA will require recertification to determine the project is still in compliance with the owner-occupancy and other conditions are met.

There are several Project Eligibility Requirements that stand out.

1) No more than 15 percent of the total units can be in arrears (more than 30 days past due) of their condominium association fee payment.

2) At least 50 percent of the units of a project must be owner occupied.

3) Projects consisting of four or more units may not have more than 30 percent of the total units encumbered with FHA loans.