VA Clarifies FHA Condo Approval Policy
The VA clarified last week that they will continue to accept FHA approved condos so long as the condo was approved FHA prior to December 7, 2009. In a VA circular dated November 30, 2009 (Circular 26-09-19) the VA announced that it would no longer accept FHA condo approvals for VA loans.
Here is an excerpt of the November 2009 circular:
1. Purpose. The purpose of this circular is to announce the rescission of the VA policy regarding acceptance of HUD/FHA approvals of condominium projects, as stated in the VA Lender’s Handbook, Chapter 16, Common Interest Communities, Condominiums and Planned Unit Developments, section 16-A.02.
2. Background. VA and HUD/FHA traditionally required similar review and approval procedures for condominium projects, and VA has generally accepted those condominium projects based on approval by FHA, without further review of the organizational documents.
3. Details. HUD Mortgagee Letter 2009-46 B, dated November 6, 2009, has amended FHA condominium approval requirements to the extent that they no longer conform with VA condominium statutes, regulations, or policy requirements.
4. Action. Effective December 7, 2009, VA will no longer accept HUD/FHA condominium project appraisals in lieu of VA project review. Condominiums previously accepted by VA, based upon HUD/FHA acceptance, will continue to be acceptable to VA.
So basically, when FHA changed their condo approval requirements, they no longer met the VA condo guidelines.
The May 17, 2010 circular (Circular 26-09-19 Change 1) attempts to clarify when VA can and cannot accept HUD/FHA/USDA condominium project approvals.
Here is an excerpt of the May 2010 circular:
1. Purpose. The purpose of this change is to clarify when VA can and cannot accept
HUD/FHA/USDA condominium project approvals.
a. VA can accept HUD/FHA/USDA condominium approvals if the project approval was
dated prior to December 7, 2009.
b. VA cannot accept HUD/FHA/USDA condominium approvals if the project approval was
dated on or after December 7, 2009.
c. VA cannot accept phases annexed into the project approved by HUD/FHA/USDA if the
annexation occurred on or after December 7, 2009. If this is the case, a full review of the legal
documents for the entire project must be performed by VA.