FHA Gets More Flexible

The Department of Housing and Urban Development has eased up on some of its guidelines for its Federal Housing Administration condominium approval process.

Unveiled June 30, FHA Mortgagee Letter 2011-22, in tandem with the Condominium Project Approval and Processing Guide, clarifies the FHA's existing policy guidance and update condo approval procedures.

The new guidelines make permanent many temporary waivers that were issued in 2009 (Mortgagee Letter 2009-46B) to address weakened housing market conditions. Those waivers were set to end in December 2010 but were extended through June 30 (Mortgagee Letter 2011-03).

The new guidance give the FHA more flexibility to make the approval process more efficient and effective while addressing the changing market conditions. Among the highlights of the new guidelines:

Pre-Sale Requirements

At least 30 percent of the total units must be sold prior to endorsement for a mortgage on any unit. This was set to return to 50 percent.

FHA Concentration

FHA will not insure any mortgages in an unapproved project if 50 percent of more of the units are FHA-insured. The concentration had been set to return to 30 percent.

Investor Ownership

HUD did not change the 10 percent investor ownership limitation that applies to all rented and leased units that a developer/builder owns, including those units acquired during a project acquisition.

Homeowner Association Dues

HUD retained the requirement that no more than 15 percent of the total units can be in arrears (more than 30 days past due) of the condominium association fee payments.