FHA Releases Condominium Approval Process

FHA Releases Condominium Approval Process

FHA recently released Mortgagee Letter (ML) 2009-46 A: Temporary Guidance for Condominium Policy and ML 2009-46 B: Condominium Approval Processes for Single Family Housing. The temporary guidance 1) increases FHA concentration requirements to 50 percent, 2) requires 50 percent of units in a project to be owner-occupied but vacant and REO property are not considered in the calculation of the owner-occupancy percentage, 3) reduces the pre-sale requirement to 30 percent, 4) all projects in Florida are required to be reviewed under the HUD Review and Approval Process (HRAP), and 5) Spot Loans are extended through February 1, 2010. The temporary guidance is effective for all FHA case numbers assigned on or after December 7, 2009 through December 31, 2010, except for the Spot Loan Approval Process.

The guidance in ML 2009-46 B is effective for all case numbers on or after December 7, 2009 and replaces ML 2009-19, which was the initial guidance for condominium projects insured in FHA's 203(b) Singe Family Program. The new rules outline specific condominium project requirements for FHA approval. Projects may be approved through HRAP or by the lender through the Direct Endorsement Lender Review and Approval Process (DELRAP). FHA will continue to maintain a list of approved projects. The site condominium and manufactured housing condominium project changes were implemented on June 12, 2009.

On July 31, 2009, NAR President Charles McMillan sent a letter to FHA Commissioner David Stevens recommending enhancements to the new condominium rule. Mr. McMillan also discussed NAR's recommendations at a meeting with the Commissioner on September 8, 2009. NAR is calling for: 1) a reduction in the owner-occupancy requirement, 2) eliminating or increasing the FHA concentration limit, 3) reducing the pre-sale requirement, and 4) clarification of the reserve study requirement.

NAR Letter to FHA on New Condominium Rule Enhancements
Mortgagee Letter 2009-46 A: Temporary Guidance for Condominium Policy
Mortgagee Letter 2009-46 B: Condominium Approval Process for Single Family Housing

Jerome Nagy 202-383-1233, Megan Booth 202-383-1222

NATIONAL ASSOCIATION OF REALTORS®
Headquarters: 430 North Michigan Avenue, Chicago, IL. 60611-4087
DC Office: 500 New Jersey Avenue, NW, Washington, DC 20001-2020
1-800-874-6500