Delay in FHA Condominium Insurance Regulation Implementation Update   2 comments

According to Mortgagee Letter 2009-19, the Federal Housing Administration (“FHA”) was going to implement new regulations changing the approval process for condominium FHA mortgage insurance eligibility. The new regulations were to take effect on October 1st, 2009.

See Mortgagee Letter 2009-19:

However, FHA has delayed the implementation of these regulations until November 2nd, 2009.

Why does this matter? Under the proposed regulations, all condominiums that have already been approved will need to be re-approved to obtain FHA financing on a going forward basis. Several industry groups have engaged in dialogue with FHA and others over concerns regarding the new regulations and what they mean for lenders, condominium association boards and condominium association managers.

Generally, the requirements that cause concern are:

1. requiring 50% of units in a new development to be pre-sold before any mortgage loan in the development will be insured by FHA;

2. requiring 50% of the units to be owner-occupied or sold to owners who intend to occupy the units;

3. no more than 25% of the property’s total floor area can be used for commercial purposes;

4. FHA will not insure a loan if more than 15% of the units are 30 days past due on their assessments;

5. FHA will not insure more than 30% of units in any one development;

6. an annual reserve study is required; and

7. requiring the association to fund at least 60% of reserves called for in most recent reserve study.

It is also important to realize that FHA, the Veterans’ Administration, Fannie Mae, and Freddie Mac all have different underwriting requirements for condominiums, all of them recently revised. This can have an effect on new communities, as well as condominiums that are only partially developed and sold. Given the situation, there may be condominiums that are in the process of their initial sales that already have noncompliant documents.

By: Amy H. Bray, a partner in our Commercial Real Estate Group


2 responses to “Delay in FHA Condominium Insurance Regulation Implementation Update

Subscribe to comments with RSS.

  1. Hey, I read a lot of blogs on a daily basis and for the most part, people lack substance but, I just wanted to make a quick comment to say GREAT blog!…..I”ll be checking in on a regularly now….Keep up the good work! 🙂

  2. Pingback: FHA Requirements for Condominiums Delayed Again « Andersen, Tate & Carr, P.C.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: