More change is in the air for developers of condo projects and for condo owners who desire to get approved for FHA Financing. The details of the changes coming can be found in the 2009-19 Mortgagee Letter on the HUD website issued 12-June. The FHA is annoucing profound changes to their condo approval process and the outright elimination of the Spot Approval Process. Lookout lenders, more burden, work and overall responsibility is coming your way, while full condo approval documentation and requirements will see a reduction. These changes will become effective 1-Oct. '09. Although, the ripple in the water will almost start to be flet immediately.
2 options for Lenders for condominium approval processing:
- HUD Review and Approval Process (HRAP).
- Direct Endorsement Lender Review and Approval Process (DELRAP), outlined in this Mortgagee Letter. This option is only available to lenders who have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects.
The processing options stated above will be applicable to condominium developments that are:
- Proposed/Under Construction;
- Existing Construction; or
- Conversions.
Eligible Projects:
The Condominium Project has been created and exists in full compliance with applicable State law requirements of the jurisdiction in which the Condominium Project is located, and with all other applicable laws and regulations.
Certain types of projects will be ineligible. For Instance:
- Condominium Hotel or “Condotels”
- Timeshares or segmented ownership projects
- Houseboat projects
- Multi-dwelling unit condominiums [i.e. more than one dwelling per condominium unit]
- All projects not deemed to be used primarily as residential
The major 'Negative" in these new guidelines is the the “Spot Loan Approval” process being elminated. The processes have been streamlined to allow for uncomplicated condominium project approvals eliminating the need to approve units on a “spot loan” basis,” according to HUD. Alomost certainly this new approval process will add more time to the approval of a Condo Project compared to the more immediate quick “Spot Approval” process.
Who will challenge the elimination of the Spot Loan Approval process? Realtors? NAR?
