5. Established
Condominium
Developments:
History
• Individual
‘spot
loan’
approval
discon7nued
• Project
approval
is
required
for
any
FHA
financing
within
a
condominium
community
• Mortgagee
LeZer
2011-‐22
• Project
Approval
valid
for
2
years
5
6. Established
Condominium
Developments:
FHA
Overview
• Approximately
30%
of
all
mortgage
loans
na7onwide
• Reverse
mortgages
allow
homeowners
above
the
age
of
62
a
unique
op7on
for
financing
• Allows
mortgages
with
lower
down
payment
and
reduced
credit
score
requirements
• Recent
project
approval
withdrawal
has
recently
resulted
in
over
9200
developments
na7onally
that
were
removed
from
the
project
approval
list
6
7. Established
Condominium
Developments:
Processing
Op9ons
• HRAP:
HUD
Review
and
Approval
Process
• Reviewed
and
processed
by
FHA
staff
• DELRAP:
Direct
Endorsement
Lender
Review
and
Approval
Process
• Reviewed
and
processed
by
Direct
Endorsement
(DE)
mortgagee
staff
• Must
have
uncondi7onal
DE
authority
7
8. Established
Condominium
Developments:
Submission
Requirements
• Current
balance
sheet
less
than
90
days
old
• Current
reserve
balance
evidence
by
bank
statement
from
last
30
days
• Current
year
opera7ng
budget
• Previous
years
financial
statement
• Recorded
condominium
declara7ons,
master
deed,
by-‐laws,
CCRs
• Recorded
site
plan
and
plat
maps
• Signed
project
cer7fica7on
• Signed
management
agreement
• FEMA
flood
map
• HOA
Tax
ID
Number
8
9. Established
Condominium
Developments:
General
Requirements
• Right
of
First
Refusal
is
permiZed
unless
discriminatory
under
Fair
Housing
Act
regula7ons
at
24
CFR
part
100
• At
least
50%
of
the
units
are
owner
occupied
• No
one
investor
can
own
more
than
10%
of
the
units
within
the
development
• No
more
than
15%
of
the
total
units
are
more
than
30
days
past
due
on
HOA
dues.
The
15%
includes
bank
owned
and
vacant
units
9
10. New
Condominium
Developments:
Overview
• Pre-‐Sale
• Transfer
of
Control
• Submission
Requirements
• Distressed
Asset
Purchases
10
11. New
Condominium
Developments:
Pre-‐Sale
• 30%
pre-‐sale
• Pre-‐sale
remains
at
30%
for
1st
year
only
from
the
date
of
1st
unit
conveyance
• 50%
pre-‐sale
aeer
12
months
• 50%
maximum
concentra7on
• Legally
phased
projects
accepted
• Pre-‐sale
is
based
upon
total
number
of
units
annexed
in
to
the
site
11
12. New
Condominium
Developments:
Transfer
of
Control
• Transfer
of
control
of
the
Associa7on
must
occur
no
later
than:
• 120
days
aeer
the
date
by
which
75%
of
the
units
have
been
conveyed
to
the
unit
purchasers;
OR
• 3
years
aeer
the
comple7on
of
the
project
evidenced
by
the
first
conveyance
to
a
unit
purchaser;
OR
• As
required
by
state
law
12
13. New
Condominium
Developments:
Submission
Requirements,
Part
1
• Phase
I
Environmental
Site
Assessment,
performed
in
accordance
with
ASTM
E-‐1527-‐05,
must
be
included
in
the
project
approval
package
submiZed
to
FHA
if
under
construc7on
or
proposed
• Builder’s
cer7fica7on
of
plans,
specifica7ons
and
site,
form
HUD-‐92541-‐required
on
project
and
loan
level
• Builder’s
warranty,
form
HUD-‐92544
required
on
loan
level
• Building
permit
• Current
site
photographs
13
14. New
Condominium
Developments:
Submission
Requirements,
Part
2
• Final
cer7ficate
of
occupancy
• Temporary
CO
accepted
if
corresponding
state
guidelines
allow
for
site
inspec7on
• Reserve
Study
can
be
u7lized
to
prove
accurate
reserve
requirements.
• Reserve
Studies
are
not
required
for
new
construc7on
with
some
excep7ons
• Current
budget
for
declared
phases
• Current
balance
sheet
• Bank
statements
may
be
requested
14
15. New
Condominium
Developments:
Distressed
Asset
Purchases
• Bankruptcy/Receivership/Foreclosure/
Deed-‐in-‐Lieu
of
Foreclosure
• One
year
aging
required
for
eligibility
• Financial
document
review
to
determine
eligibility
• Reserve
study
required
• Asset
Sale
• 50%
of
declared
units
must
be
owner
occupied
• Reserve
study
required
• Addi7onal
financial
oversight
may
be
requested
15
17. Converted
Condominium
Developments:
Non
Gut
Rehab
Part
1
• Project
must
have
recorded
legal
documents
prior
to
submission
• 51%
of
the
units
within
the
development
must
be
owner
occupied
• Pre-‐Sale
must
be
51%
of
the
total
number
of
units
within
the
development
• No
single
en7ty/investor
may
own
more
than
10%
of
the
units
within
the
development
• Developer/Sponsor
is
NOT
considered
an
investor
and
therefore
unsold
units
owned
by
the
sponsor
are
not
to
be
considered
in
this
calcula7on
for
the
first
2
years
from
recorda7on.
17
18. Converted
Condominium
Developments:
Non
Gut
Rehab
Part
2
• The
units
may
be
vacant
or
tenant
occupied
• Sponsor/Developer
must
provide
a
comprehensive
marke7ng
strategy
for
units
currently
rented
with
the
excep7on
of
those
rentals
required
by
State
law
• Reserve
study
required
• HRAP
processing
only
18
19. Converted
Condominium
Developments:
Gut
Rehab
• 30%
pre-‐sale
• Pre-‐sale
remains
at
30%
for
1st
year
only
from
the
date
of
1st
unit
conveyance
and
50%
thereaeer
• Reserve
Study
required:
Newly
Converted
• In
addi7on
to
monthly
contribu7on,
addi7onal
reserve
funding
required
for
any
components
within
the
development
that
require
replacement
within
5
years
of
the
date
of
the
reserve
study
as
defined
by
the
reserve
study
• HRAP
processing
only
19
20. Converted
Condominium
Developments:
Reserve
Study
Requirements
• In
order
to
accurately
fund
the
reserve
account
for
a
condominium,
a
reserve
study,
that
is
compliant
with
FHA
guidelines,
can
be
u7lized.
• Can
be
u7lized
to
provide
accurate
reserve
requirements
and
funding
overview.
Determina7on
of
reserve
study,
whether
higher
than
10%
or
lower
than
10%,
may
be
u7lized
as
a
line
item
for
reserve.
• 10%
Line
item
for
reserves
• In
the
absence
of
a
specific
guideline
requiring
a
reserve
study,
a
10%
line
item
within
the
budget
is
to
be
u7lized
• Mandatory
for
newly
converted
gut
rehab
and
non
gut
rehab
condominium
20
21. Converted
Condominium
Developments:
Noise
Study
Requirements
• HUD
requires
that
a
disclosure
be
completed
by
the
sponsor/
developer/HOA
that
outlines
the
property’s
loca7on
rela7ve
to
noise
hazards.
• Required
for
newly
constructed
and
newly
converted
gut-‐
rehab
developments
• Proximi7es
for
proposed,
under
construc7on,
newly
constructed
or
newly
converted
gut-‐rehab
condos:
• 1000
feet
from
a
heavily
travelled
road
• 3000
feet
from
a
railroad
or
railway
• 1
mile
from
a
civil
airfield
• 5
miles
from
a
military
airfield
21
23. FHA
Insurance
Requirements:
Hazard,
Unit
Owner,
&
Liability
Hazard
• HOA
Requirement
• 100%
Replacement
Cost
Unit
Owners
Insurance
• Walls
In
Coverage
–
“All-‐
In”
Coverage
Liability-‐
$1,000,000
• HOA
Requirement
23
24. FHA
Insurance
Requirements:
Fidelity
Insurance
• For
developments
with
more
than
20
units
• HOA
maintained
• If
managed,
insurance
must
specifically
name
the
management
company
within
the
policy
• 3
months
assessments
plus
reserve
funds
24
25. FHA
Insurance
Requirements:
Flood
Insurance*
• Coverage
equal
to
replacement
cost
• HOA
required
to
maintain
coverage
• Borrower
or
individual
unit
owner
may
not
obtain
coverage
• LeZer
of
Map
Amendment
(LOMA)
or
LeZer
of
Map
Revision
(LOMR)
must
be
provided
for
all
developments
in
lieu
of
flood
insurance
*if
in
flood
zone.
25
27. FHA
Project
Cer9fica9ons:
Updated
Compliance
Requirements
• Signing
the
project
cer7fica7on
• State
and
local
law
compliance
cer7fica7on
• Whom
is
qualified
to
make
this
representa7on?
• Ongoing
cer7fica7on
obliga7on
• What
are
the
risks
in
cer7fying
to
ongoing
compliance?
• Up
to
$1,000,000
fine
and
30
years
imprisonment
for
false
or
fraudulent
statements
• Knowing
penal7es
for
fraudulent
cer7fica7on
27
28. FHA
Project
Cer9fica9ons:
Poten9al
Landmines
• Community
Associa7on
Loans
• Are
you
automa7cally
rejected
if
your
community
has
a
loan?
• Special
Assessments
• What
will
you
have
to
submit?
• Pending
Li7ga7on
• What
has
to
be
disclosed?
• Statement
must
be
signed
by
aZorney
• Transfer
Fees
• Restraint
on
Aliena7on
(203.41)
28
29. FHA
Project
Cer9fica9ons:
Lender
Affidavits
• Cer7fica7on
For
Individual
Unit
Financing
• Lender
Requirement
For
Financing
• Loan
Level
Cer7fica7on
• Investor
Ownership
• Units
in
Arrears
• Owner
Occupancy
Percentage
Verified
• Pre-‐Sale
Cer7fica7on
• Required
for
New
Construc7on,
New
Gut
and
Non-‐Gut
Rehab
Conversions
29
30. Fannie
Mae
Guideline
Changes
Join
us
for
our
webinar
Wednesday,
November
9,
to
discuss
new
Fannie
Mae
Condo
Guideline
Changes
30