FHA Condo Rules Make Selling Many Condos Difficult

Recently, there were changes made to the FHA condo regulations on which projects can be FHA insured or not.

According to a Washington Post rundown of the changes, a major one is the “spot approval” that used to be acceptable to be eligible for an FHA loan. Another article goes more in depth on the issues this is causing for condo home sellers.

The agency eliminated spot approval earlier this year. Now, any condo buyer with an FHA loan must stick to an FHA-approved building. A lender, developer/builder, homeowners association or management company can submit a package to the FHA seeking approval. The change was part of a broader initiative to tighten FHA condo policy. Some elements of that initiative have been temporarily loosened through Dec. 31 to try to stabilize the condo market.Why? Condos are widely considered the market’s shakiest segment because they are popular with speculators and financially vulnerable entry-level buyers. A lot of foreclosure-related losses have come from condos, which is why industry policies have forced lenders to look more closely at the makeup of entire complexes before extending loans.

Without that FHA approval, it ties the hands of many buyers, as most would then need more money for a downpayment, which they may not have.

I did a quick spot check on Timonium condos on the HUD site where you can review FHA condo approval statuses. I was sad to see how many had expired, leaving any sellers in those buildings at a disadvantage! Of the 23 Timonium condo communities that came up when I searched 21093, 16 of them have expired. Here is a pdf of the Timonium FHA condo statuses as of today.

I have written much about the FHA Condo Recertifications, because we have so many Timonium condos that are now affected by these changes.

This is not good news, and I hope that the associations are working toward their re-certifications, though I understand across the US that many have tried and been denied over technicalities or other issues, and that the penalty for a director providing incorrect information (even if in error) faces $1 million in fines & up to 30 years in jail, so many are not willing to take on the risk.

Hopefully there will be another resolution on this matter, so affected condo owners aren’t hurt more by the inability to sell to FHA homebuyers.

FHA Condo Approval Expiration Dates Extended

FHA Condo approval expiration dates were extended by the FHA, and this news shared by one of my mortgage partners, Brian Picker, of 1st Mariner Mortgage Corporation.

Thank you, Brian!

From Brian Picker, 1st Mariner Mortgage:

Big news as older FHA condo projects were set to expire yesterday which would have been a nightmare for getting them all re-approved by HUD in a timely manner.  In light of this HUD extended the expirations dates out based on when the original project was FHA approved.

FHA Condominium Project Approvals Expiration Dates Extended:

FHA announces extension of condominium project approvals with an expiration date of December 7, 2010. Provided below are the extension dates based on five-year time frames with the exception of those condominium projects with original approval dates from 1972 -1985.

Initial Project Approval Dates     Current Expiration Date        New Expiration Date

1972 – 1980                              December 7, 2010               December 31, 2010

1981 – 1985                              December 7, 2010               December 31, 2010

1986 – 1990                              December 7, 2010               May 31, 2011

1991 – 1995                              December 7, 2010               July 31, 2011

1996 – 2000                              December 7, 2010               August 31, 2011

2001 – 2005                              December 7, 2010               September 30, 2011

2006 – 2008 (Sept)                    December 7, 2010               March 31, 2011

The extensions were granted to reduce the impact of processing and reviewing the number of project approvals expiring at the same time while recognizing current housing market conditions.  Lenders and/or other interested parties are encouraged to begin the re-approval or recertification process as early as possible as it is not anticipated that any further extensions of project approvals will be issued.

The Condominium look-up page and the FHA Connection databases were updated on December 7, 2010 and now reflect the extended expiration dates.  The links to the sites are:

Condominium look-up page: https://entp.hud.gov/idapp/html/condlook.cfm

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I have written much about the FHA Condo Recertifications, because we have so many Timonium condos that would be effected by these changes. Luckily, it appears, if they haven’t been recertified, they have some time to do so!

FHA Condo Recertification Due December 7, 2010

With the many changes in the mortgage industry, it is hard to keep up with what deadlines are coming up next.

On December 7, 2010, the FHA condo recertification process must be completed by each individual condominium complex in order to be eligible for homebuyers to receive FHA financing in their building.

There is an application and process that must be completed in full for the building’s recertification to have the opportunity to be approved. Thank you to Dan Plunkett, of Prosperity Mortgage, a part of the Wells Fargo Home Mortgage company for sharing the two forms they must use to submit for approval.

One is the FHA New Condo Approval Process for condos that have never been approved for FHA financing in the past. These would usually be newly built units.

The other is the FHA Recertification Project Submission Form for developments that were approved before and need to go through the certification process again, which would be most condominiums.

The good news for most Timonium condo owners, most of the ones in the area have already been recertified. I wrote about the updated Timonium condo approvals in August, and even more have been added to the HUD site since.

During these confusing times, it is best to have an agent and a mortgage specialist who understand the muddy waters. Contact me if you are considering selling or buying a Timonium condo. My team of professionals can help!

*Since writing this, HUD & FHA have extended the FHA condo recertification deadlines. Here is more information about the FHA condo recertification deadline extensions.*

Timonium Condo FHA Approval

At the end of 2009, HUD changed its’ condo approval process for FHA condo financing.

No longer can a community be given a “spot” approval when a unit goes under contract if a buyer desires to use FHA financing.

Condominium developments must be approved in advance of an FHA sale and the approval is only for a certain amount of time.

Many Timonium condo buildings have been approved already.

Luckily HUD has set up a website to check whether a condo development has been HRAP or DELRAP approved.

I entered the Timonium zip code 21093 to see all approved units. You can do this for any zip code if you are unsure of the condo development’s name!

Contact me if you are considering selling or buying a Timonium condo. I can help you navigate these tough waters!