Madison Mortgage Blog: Dennis Hardy

• First 5 projects must be submitted to HUD for review
• Approval/Denial package must be delivered to HUD electronically within 5 days of disposition
• Florida Condos are not eligible for DELRAP
• Manufactured Home Condos are not eligible for DELRAP

Spot Approval Process:  May continue until case numbers issued February 1, 2010 or after

• Site Condominiums
• FHA to FHA Streamline Refinances
• FHA/HUD Real Estate Owned

• At least 50% owner occupied
• No more than 10% of the units my be owned by one investor/developer/builder (if less than 10 units, no more than one unit by an investor)

Temporary Guidelines: Vacant and  tenant-occupied REO units are excluded from the 50% calculation

• If 3 or fewer units, no more than one unit with FHA insurance
• Concentration levels will be tracked on FHA Connection and http://www.hud.gov, based on case numbers assigned for project

Temporary Guidelines: 50%

• May be increased to 100% for well established projects

• Legal phasing is recommended
• Phasing guidelines for vertical buildings are provided

Temporary Guidelines: 30%

• If a building permit and a certificate of occupancy was issued, neither an early start letter or  a HUD 10 year warranty is required
• Builder’s Certification, Builder’s Warranty and Affirmative Fair Housing Marketing Plan are required
• Temporary/Conditional Certificate of Occupancy may be acceptable under some circumstances

• No more than 25% of a property’s total floor area may be commercial
• Use must be homogeneous with residential use

• Permitted unless it is discriminatory under the Fair Housing Act

• One year waiting period is eliminated
• Rehabilitation must be 100% complete
• Conversions from non-residential use are treated as new construction

• Not required if the project has progressed beyond the stage of construction that HUD would have any influence
• Appraiser identified environmental concerns must be addressed with mitigating factors

• Sufficient funds to maintain amenities
• At least 10% of the budget for replacement reserves and capital expenditures
• Adequate funding for insurance
• In lieu of budget or reserve study, may use Fannie Mae form 1073a, Analysis of Annual Income and Expenses executed by the owners association or management company

• Hazard Insurance
• HO-6 Policy-If the master policy does not cover the interior of the unit, the homeowner is required to obtain an interior policy
• Liability Insurance
• Fidelity Bond/Insurance
• Flood Insurance, if the property is located in a Special Flood Hazard Area

• The current list is being moved to the new list in FHA Connection
• Additional data entry guidance will be provided in an upcoming Mortgagee Letter
• Recertification guidelines will apply (see below).

• Lender must certify on company letterhead signed by an authorized representative that the project complies with HUD’s requirements
• The Builder/Developer must certify that the project complies with HUD guidelines
• Unrecorded legal documents utilized for project approval must be recorded prior to endorsing any FHA loans.

Lender’s Certification to add a project to the approved list:

• Upon review of the project approval package, the lender must sign and date the Lender’s Certification of Condominium Requirements.

Lender’s Certification for a project on the approved list:

• Subsequent lenders that want to insure an individual FHA loan in a condominium project are not required to perform a project approval review, but are required to perform a loan-level review to determine continued compliance with some of the initial review requirements.  The lender Certification for Individual Unit Financing, is required.

Recertification of Project Approvals:

• Required two years from the date a project was placed on the approved list
• May use the DELRAP or the HRAP process
• Must consider any pending assessments, legal action against the association, and if the project continues to maintain adequate insurance coverage

• Less than 12 months since rejection/withdrawal:  Requires HRAP
• More than 12 months since rejection/withdrawal: DELRAP or HRAP is acceptable

• Lenders must retain project approval documents for three years
• All required condo certifications must be retained in the FHA case binder

• Lenders that issue a project approval using the DELRAP process are liable for any material defects found by HUD with the project approval or any loans they originate and/or underwrite in the project.
• Lenders that rely on a project approval issued by another lender are only responsible for the loan-level certification