HUD Releases New Condo Approval Process
Mortgagee letter 2009-19 was recently issued by the Department of Housing and Urban Development, HUD on June 12. The mortgage letter implements a new approval process for all condominium mortgages and home equity conversion mortgages insured by FHA. The new amendments are in accord with the 2008 Housing and Economic Recovery Act.
The new approval process would be effective come October 1. According to the new approval standards, all condominium projects will have to be approved before mortgages can be insured. After approval of the project the lender can underwrite a condo unit loan.
According to the HUD mortgagee letter, project approval terminates and expires two years after it has been added on the list of HUD approved condominium projects. After expiration the condominium will have to be re-certified. The 2 years expiration term also affects all projects currently on the list. The list is said to already contain 40,000 condo projects from across the country.
Approval could be granted from HUD or from lenders who have unconditional direct endorsement authority and the necessary staff expertise needed to approve condominium projects. Such lenders could decide to evaluate project eligibility, review the project documentation and certify that HUD regulations have been complied with.
According to the same HUD mortgagee letter, effective immediately detached single family homes will not require project approval. An earlier HUD mortgagee letter 2009-16 made manufactured homes that are part of condominium projects eligible for FHA mortgages since May 21 and letter 2009-19 restricts their approval to HUD only. They re not allowed to be processed as site condominiums.
The new approval process is expected to lead to a rush of reverse mortgage applications in the next few months before October 1st when they are to be implemented. The new approval process will stop all spot loan approvals for condo projects not approved. A lot of already approved projects will also need to be re-certified.
This new standard will for the first time allow direct endorsement lenders to approve condominium projects.
