FHA Announces Temporary Waivers to New Condo Policy
New Federal Housing Administration policies for condominium financing took effect on Dec. 7. However, to address current market conditions, the agency has announced several temporary waivers through the end of 2010 for its permanent baseline guidance for condominium project eligibility.
These exceptions include a temporary decrease in the pre-sale requirement to 30% (from 50% under the new policies) and an increase to 50% (from 30%) in the allowable concentration of condo units financed with FHA-insured mortgages.
The FHA concentration can be increased to 100% for existing projects that are complete and meet certain additional requirements. New construction and conversions are not eligible for this higher exception.
The higher temporary cap on the concentration of FHA loans came as the result of discussions between NAHB Chairman Joe Robson and FHA Commissioner David Stevens.
The temporary waivers are discussed in Mortgagee Letter 2009-46A.
At the end of the waiver period, the FHA’s condo requirements will revert back to those announced in Mortgagee Letter 2009-46B, which outlines the criteria that condo projects must meet to receive agency approval and describes the condominium project approval process.
Under this policy, the FHA will continue to perform project reviews. Alternatively, lenders that receive the FHA’s okay may also grant project approvals, although by doing so they assume some risks. Projects located in Florida are not eligible for lender review at the present time.
In a significant change for owners of existing condos, after Feb. 1, 2010 lenders will no longer be able to grant “spot” approvals of FHA-insured loans for potential condominium purchasers who want to purchase units in projects that lack FHA approval.
For a list from the Department of Housing and Urban Development on frequently asked questions related to the two mortgagee letters, click here.
For more information, e-mail Bill Renner, or call him at 800-368-5242 x8597.