In response to the recent downturn in the housing market, the Federal Housing Administration ("FHA") has implemented new requirements which condominiums must satisfy in order for the condominium units to be eligible for FHA mortgage insurance. The "spot loan" approval process is scheduled to be entirely phased out by February 1, 2010. Therefore, absent any postponements of the phase-out deadline, after February 1, 2010 condominium units will only be eligible for FHA mortgage insurance if the entire condominium project receives FHA approval and, for the first time, lenders may now determine whether a particular condominium project meets the FHA requirements.
As part of the approval process, condominium associations are required to provide lenders with recorded copies of the condominium's legal documents, including the Declaration. As such, it is important that you have a recorded copy of all condominium documents. If necessary, your association's legal counsel can assist you in obtaining a recorded copy.
In addition, there are more specific requirements which condominiums must meet in order to be eligible for FHA mortgage insurance, including, among other things:
The current provisions of your association's governing documents may conflict with the new budgeting and insurance requirements and any issues with delinquent accounts could negatively impact upon the condominium's eligibility for FHA approval. You may wish to consider having your documents and current delinquency policy reviewed by your association's legal counsel to address any potential problems which could prevent your condominium association from obtaining or keeping its FHA mortgage insurance approval.
Thank you for your continued subscription to our newsletter. Please contact us with any suggestions for any topics which you would like to see in a future newsletter.
As part of the approval process, condominium associations are required to provide lenders with recorded copies of the condominium's legal documents, including the Declaration. As such, it is important that you have a recorded copy of all condominium documents. If necessary, your association's legal counsel can assist you in obtaining a recorded copy.
In addition, there are more specific requirements which condominiums must meet in order to be eligible for FHA mortgage insurance, including, among other things:
- no more than 15% of the total units in the condominium may be more than 30 days delinquent in the payment of assessments;
- the association's budget must provide for the allotment of funds in a specific manner, including devoting a minimum of 10% of the entire budget to reserves; and
- any condominium with more than 20 units must maintain fidelity bonds or insurance to cover directors, officers and any other persons who are responsible for handling the association's funds in an amount equal to three months total assessments on all units plus the total amount of reserve funds.
The current provisions of your association's governing documents may conflict with the new budgeting and insurance requirements and any issues with delinquent accounts could negatively impact upon the condominium's eligibility for FHA approval. You may wish to consider having your documents and current delinquency policy reviewed by your association's legal counsel to address any potential problems which could prevent your condominium association from obtaining or keeping its FHA mortgage insurance approval.
Thank you for your continued subscription to our newsletter. Please contact us with any suggestions for any topics which you would like to see in a future newsletter.
