The Federal Housing Administration recently announced significant changes to FHA Condominium financing. The FHA condo approval changes go into effect on October 1, 2009 and the ramifications for developers, condominium associations, buyers, and sellers could be serious.
Some of the highlights of these changes include:
1. Any condominium development approved prior to October 1, 2008 (10/1/2008) loses its FHA approval and must formally re-apply.
2. No spot approvals, all applications must go to FHA directly but DE lenders can approve but with enormous liabilities if they miss one item.
3. Existing condominiums, regardless of whether they were FHA approved prior to October 1, 2008 or not will have to reapply for HUD approval. This means if a seller wants to sell their condominium unit, even if they received an FHA loan in 2006, that a new borrower won't be able to get an FHA loan on your unit unless your condominium has been re-approved by HUD.
FHA's actions could be disastrous for condominium sales across the United States especially given the fact that most loans today are FHA loans. If you think the HUD approval process is quick, think again, because most lawyers estimate that it takes them six months to get HUD approval. If this guideline change isn't implemented then I'm sure the approval process will become inundated so fast that it could overwhelm the process even further causing delays that could quickly reach a year or more. A borrower can still qualify for a Freddie Mac, Fannie Mae, VA, or USDA loan but if Freddie and Fannie are the borrower's only option to get condo financing they should prepare themselves to pay significantly higher fees for the same loan that FHA would have provided to them had the Condo been FHA approved.
To see if your Condominium will be affected by the new FHA Approval process please go to this website and see if your condominium is listed.
See below for the entire letter.
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THE FEDERAL HOUSING ADMINISTRATION (FHA) CONDOMINIUM APPROVAL CHANGES COULD DEVASTATE CONDOMINIUM SALES