Loan Modification

Condos that HOAs miss FHA deadline lose FHA approval

By Gina Pogol

Last Wednesday, approximately 25,000 condominium associations missed their deadline to get their paperwork in to retain their eligibility for FHA financing. This means that unsuspecting owners of units may find themselves unable to refinance them or sell them to people who want / need FHA financing. The effect of this could be devastating in some housing markets when you consider that:

1. First-time home buyers are more likely than established homeowners to purchase condominium units.

2. First-time home buyers are much more likely to want / need FHA financing.

3. FHA no longer offers “spot” approvals of individual units. Therefore, owners are much more dependent on their HOAs to keep the paperwork filed and retain or obtain FHA approval.

FHA did extend the deadline to take care of eligibility requirements, but about 2,200 associations were only granted an extension to December 31, just a couple of weeks away. If yours is one of those, you might want to lean on your HOA because even if you aren’t trying to sell or refinance your unit, failure to secure FHA approval could make it harder for others to sell and thus lower your own property value.

“The extensions were granted to reduce the impact of processing and reviewing the number of project approvals expiring at the same time while recognizing current housing market conditions,”  FHA said in a letter.

The new deadlines are as follows:

• Projects approved between 1972 and 1985 must be recertified by Dec. 31.

• Projects approved between 1986 and 1990 must be recertified by May 31, 2011.

• Project approved between 1991 and 1995 must be recertified by July 31, 2011.

• Projects approved between 1996 and 2000 must be recertified by Aug. 31, 2011.

• Projects approved between 2001 and 2005 must be recertified by Sept. 30, 2011.

• Projects approved between 2006 and September of 2008 must be recertified by March 31, 2011.

The FHA insures mortgages on over 40,000 condo projects, 25,000 of need to be recertified. What could derail your project’s recertification? According to FHA:

Condominium Project approvals will expire two years from the date it has been placed on the list of approved condominiums.  This will also apply to all projects currently on the list of approved condominiums.  Further participation in the program after this two-year period has expired will require recertification to determine that the project is still in compliance with HUD?s owner-occupancy requirement and that no conditions currently exist which would present an unacceptable risk to FHA.  Items that should be given consideration are:

1.      Pending special assessments,

2.      Pending legal action against the condominium association, or its officers or directors,

3.      Hazard, liability insurance and when applicable flood insurance.

Full post as published by FHA Mortgage Guide on December 13, 2010 (boomark / email).