Check Status of VA & FHA Project Approvals
How To Get a Condo Development Approved
With less than 30% of SoCal condo associations currently approved for financing (Fannie/FHA/VA); there’s a huge opportunity for knowledgeable agents to create a successful “farming model”.
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How many expired listings could you “(re) list” if you were the “expert and driving force” behind getting a condo project it’s HUD approval?
If you are selective about which projects you (pre) target…and work with a professional “condo approval” service…you can be a “player” in less than 60 days.
Here is a quick overview of how to get a condo development HUD-approved.
In late 2009, HUD announced a new process for approving condo developments to be eligible for FHA financing.
The most common reasons for condo projects not meeting HUD standards are:
1) Owner Occupancy – Owner occupancy must be greater than 50% at the time of underwriting to be FHA eligible; 10% for Fannie approval.
Editor’s Note: Fannie/Freddie only require a 10% owner occupancy rate IF your buyer is purchasing the unit as their primary residence.
2) HOA Delinquencies – No more than 14.9% of the units in a project can be 60 +days delinquent in their HOA dues.
3) Investor ownership – One entity, be it individual, corporation or trust may not own more than 49.9% of the units within an association.
This becomes more of a problem the smaller the number of units in the project is.
4) FHA concentration – No more than 50% of the units within an association may be FHA insured.
5) Litigation – There can be no pending litigation that can adversely affect the common areas or any units (i.e. construction defect).
Any litigation of this nature will need to be resolved before approval can be granted.
Note: If collection & foreclosure litigation initiated by the HOA, does not make an association ineligible.
There are 4 key points to the new system of approving condos that are important to understand:
First: HUD did away with what were known as “spot” approvals. So it’s an “all or nothing” for project approval.
Second: It’s important to keep in mind that for technical reasons, no application can successfully be submitted without the cooperation of the Board of Directors, as well as any management company that the Board may have retained to help manage the association.
Third: HUD now has 2 pathways FHA approval:
a) HUD Review Approval Process (HRAP)
b) Direct Endorsed Lender Review Approval Process (DELRAP). For the purposes of this post I will skip this method…because it’s only relevant for NEWLY built condo projects.
When Using HRAP:
a) The application is submitted directly to HUD, which will usually take 6-8 weeks to process it.
b) The application itself is free, but most of the time interested parties end up incurring fees paid to attorneys, management companies etc., to prepare the application.
Fourth: Approval of a condo development for FHA financing expires every 2 years so the fees spent for the work of a “condo approval service” can be avoided in the future.
· Standard HUD certification questionnaire (click here for an example). The typical cost for obtaining this document (via the HOA management company) is $50-$100.
· This document will be key because it quickly reveals the issues that make or break the cert process.
Just submit the document to the HOA….the turnaround time is typically 3-5 days.
For example…if the condo project has pending litigation OR has more than 15% home owners delinquent (more than 30 days) in their HOA dues….move on to marketing to another association.
These two issues are certification killers until resolved.
OTHER REQUIRED DOCUMENTS ARE:
· Most recent HOA financial statements
· Copy of HOA master insurance policy
· Recorded condo/plat map indicating legal description
· Recorded condo site plans
· Recorded condo declarations and any or all annexations and amendments that apply
· Copy of executed and adopted condo by-laws
· Articles of Incorporation as filed
· FEMA Flood Certification Form
· Outstanding/Pending Litigation Analysis
· Special Assessments Analysis
· Last Two HOA Meeting Minutes
· HOA management agreement, or if self-managed, a letter on HOA letterhead indicating that fact.
In addition, the application should include the following information:
· Number of units in development that currently bank-owned REO
· HOA tax ID number
· Month & Year that condo was completed
The entire process if submitted properly is approx 60 days.
For more information contact: FhaReview.com
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Daniel Dobbs (.org)
Managing Broker
Mutual Home Mortgage
500 S. Kramer #165
Brea, Ca. 92821
Cell: 949 250-3981
Dandobbs6@gmail.com
BRE # 00986886 …..NMLS# 307631
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