Final (Hopefully!) FHA Condominium Lending Guidelines Issued

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After several revisions and delays, the Federal Housing Administration (FHA) has finally issued major changes to its revised guidelines on mortgage insurance requirements for condominium projects. The new guidelines are effective December 7, 2009; however, some of the requirements are phased in through January 31, 2010.

Key Points:

* The “Spot Loan” approval process will continue through February 1, 2010, after which it will be replaced by the new Direct Endorsement Lender Review & Approval Process (DELRAP); and

* The 30% cap on FHA loans per condo project will be expanded to 50% until December 31, 2010. Concentrations may be increased to 100% if certain additional conditions are met. After January 1, 2011, the cap reverts back to 30%.

* Condominium project approval is not required for condominiums comprised of single-family totally detached dwellings (no shared garages or any other attached buildings).

* Until December 31, 2010, at least 30% pre-sale level must be reached before any FHA mortgage can be granted on any unit. After 12/31/10, 50% pre-sale level must be reached.

* 50% owner occupancy rate for the entire project.

* No more than 15% of unit owners can be delinquent (over 30 days late) on their condominium fees.

* Capital reserve funding: The reserve study requirement has been eliminated, along with the requirement of at least 60% of the fully funded reserves. The new requirement requires merely that at least 10% of the association’s annual budget be set aside for reserves.

* Condo Budget review

* HO-6 insurance requirement

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