New FHA Condo Guidelines: What You Need to Know
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Transcript of New FHA Condo Guidelines: What You Need to Know
New FHA Condo Guidelines Issued: What You Need to Know
Presented by: Orest Tomaselli, CEO Na7onal Condo Advisors, LLC
10/26/11
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Na9onal Condo Advisors, LLC: The na7on’s premier condominium
project approval service
Na7onalcondoadvisors.com Ph. 888-‐726-‐6361
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• Established Condominium Developments
• New Condominium Developments • Converted Condominium Developments • FHA Insurance Requirements
• FHA Project Cer7fica7on
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New FHA Condo Guidelines: Presenta9on Outline
• History • FHA Overview • Processing Op7ons • Submission Requirements
• General Requirements
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Established Condominium Developments: Overview
• Individual ‘spot loan’ approval discon7nued • Project approval is required for any FHA financing within a condominium community
• Mortgagee LeZer 2011-‐22 • Project Approval valid for 2 years
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Established Condominium Developments: History
• Approximately 30% of all mortgage loans na7onwide
• Reverse mortgages allow homeowners above the age of 62 a unique op7on for financing
• Allows mortgages with lower down payment and reduced credit score requirements
• Recent project approval withdrawal has recently resulted in over 9200 developments na7onally that were removed from the project approval list
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Established Condominium Developments: FHA Overview
• HRAP: HUD Review and Approval Process • Reviewed and processed by FHA staff
• DELRAP: Direct Endorsement Lender Review and Approval Process
• Reviewed and processed by Direct Endorsement (DE) mortgagee staff • Must have uncondi7onal DE authority
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Established Condominium Developments: Processing Op9ons
• Current balance sheet less than 90 days old • Current reserve balance evidence by bank statement from last 30 days
• Current year opera7ng budget • Previous years financial statement • Recorded condominium declara7ons, master deed, by-‐laws, CCRs • Recorded site plan and plat maps
• Signed project cer7fica7on • Signed management agreement • FEMA flood map • HOA Tax ID Number
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Established Condominium Developments: Submission Requirements
• Right of First Refusal is permiZed unless discriminatory under Fair Housing Act regula7ons at 24 CFR part 100
• At least 50% of the units are owner occupied • No one investor can own more than 10% of the units within the development
• No more than 15% of the total units are more than 30 days past due on HOA dues. The 15% includes bank owned and vacant units
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Established Condominium Developments: General Requirements
• Pre-‐Sale • Transfer of Control • Submission Requirements • Distressed Asset Purchases
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New Condominium Developments: Overview
• 30% pre-‐sale • Pre-‐sale remains at 30% for 1st year only from the date of 1st unit conveyance
• 50% pre-‐sale aeer 12 months • 50% maximum concentra7on
• Legally phased projects accepted • Pre-‐sale is based upon total number of units annexed in to the site
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New Condominium Developments: Pre-‐Sale
• Transfer of control of the Associa7on must occur no later than:
• 120 days aeer the date by which 75% of the units have been conveyed to the unit purchasers; OR
• 3 years aeer the comple7on of the project evidenced by the first conveyance to a unit purchaser; OR
• As required by state law
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New Condominium Developments: Transfer of Control
• Phase I Environmental Site Assessment, performed in accordance with ASTM E-‐1527-‐05, must be included in the project approval package submiZed to FHA if under construc7on or proposed
• Builder’s cer7fica7on of plans, specifica7ons and site, form HUD-‐92541-‐required on project and loan level
• Builder’s warranty, form HUD-‐92544 required on loan level • Building permit
• Current site photographs
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New Condominium Developments: Submission Requirements, Part 1
• Final cer7ficate of occupancy • Temporary CO accepted if corresponding state guidelines allow for site inspec7on
• Reserve Study can be u7lized to prove accurate reserve requirements.
• Reserve Studies are not required for new construc7on with some excep7ons
• Current budget for declared phases • Current balance sheet • Bank statements may be requested
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New Condominium Developments: Submission Requirements, Part 2
• Bankruptcy/Receivership/Foreclosure/ Deed-‐in-‐Lieu of Foreclosure
• One year aging required for eligibility • Financial document review to determine eligibility
• Reserve study required • Asset Sale
• 50% of declared units must be owner occupied • Reserve study required • Addi7onal financial oversight may be requested
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New Condominium Developments: Distressed Asset Purchases
• Non-‐Gut Rehab • Gut Rehab • Reserve Study Requirements • Noise Study Requirements
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Converted Condominium Developments: Overview
• Project must have recorded legal documents prior to submission
• 51% of the units within the development must be owner occupied
• Pre-‐Sale must be 51% of the total number of units within the development
• No single en7ty/investor may own more than 10% of the units within the development
• Developer/Sponsor is NOT considered an investor and therefore unsold units owned by the sponsor are not to be considered in this calcula7on for the first 2 years from recorda7on.
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Converted Condominium Developments: Non Gut Rehab Part 1
• The units may be vacant or tenant occupied • Sponsor/Developer must provide a comprehensive marke7ng strategy for units currently rented with the excep7on of those rentals required by State law
• Reserve study required • HRAP processing only
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Converted Condominium Developments: Non Gut Rehab Part 2
• 30% pre-‐sale • Pre-‐sale remains at 30% for 1st year only from the date of 1st unit conveyance and 50% thereaeer
• Reserve Study required: Newly Converted • In addi7on to monthly contribu7on, addi7onal reserve funding
required for any components within the development that require replacement within 5 years of the date of the reserve study as defined by the reserve study
• HRAP processing only
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Converted Condominium Developments: Gut Rehab
• In order to accurately fund the reserve account for a condominium, a reserve study, that is compliant with FHA guidelines, can be u7lized.
• Can be u7lized to provide accurate reserve requirements and funding overview. Determina7on of reserve study, whether higher than 10% or lower than 10%, may be u7lized as a line item for reserve.
• 10% Line item for reserves • In the absence of a specific guideline requiring a reserve study, a 10% line item within the budget is to be u7lized
• Mandatory for newly converted gut rehab and non gut rehab condominium
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Converted Condominium Developments: Reserve Study Requirements
• HUD requires that a disclosure be completed by the sponsor/ developer/HOA that outlines the property’s loca7on rela7ve to noise hazards.
• Required for newly constructed and newly converted gut-‐ rehab developments
• Proximi7es for proposed, under construc7on, newly constructed or newly converted gut-‐rehab condos:
• 1000 feet from a heavily travelled road • 3000 feet from a railroad or railway
• 1 mile from a civil airfield
• 5 miles from a military airfield
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Converted Condominium Developments: Noise Study Requirements
• Hazard, Unit Owners, & Liability Insurance • Fidelity Insurance • Flood Insurance
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FHA Insurance Requirements: Overview
Hazard
• HOA Requirement • 100% Replacement Cost Unit Owners Insurance
• Walls In Coverage – “All-‐ In” Coverage Liability-‐ $1,000,000 • HOA Requirement
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FHA Insurance Requirements: Hazard, Unit Owner, & Liability
• For developments with more than 20 units
• HOA maintained • If managed, insurance must specifically name the management company within the policy
• 3 months assessments plus reserve funds
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FHA Insurance Requirements: Fidelity Insurance
• Coverage equal to replacement cost
• HOA required to maintain coverage • Borrower or individual unit owner may not obtain coverage
• LeZer of Map Amendment (LOMA) or LeZer of Map Revision (LOMR) must be provided for all developments in lieu of flood insurance
*if in flood zone.
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FHA Insurance Requirements: Flood Insurance*
• Updated Compliance Requirements
• Poten7al Landmines • Lender Affidavits
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FHA Project Cer9fica9on: Overview
• Signing the project cer7fica7on • State and local law compliance cer7fica7on
• Whom is qualified to make this representa7on? • Ongoing cer7fica7on obliga7on
• What are the risks in cer7fying to ongoing compliance? • Up to $1,000,000 fine and 30 years imprisonment for false or fraudulent statements
• Knowing penal7es for fraudulent cer7fica7on
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FHA Project Cer9fica9ons: Updated Compliance Requirements
• Community Associa7on Loans • Are you automa7cally rejected if your community has a loan?
• Special Assessments • What will you have to submit?
• Pending Li7ga7on • What has to be disclosed? • Statement must be signed by aZorney
• Transfer Fees • Restraint on Aliena7on (203.41)
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FHA Project Cer9fica9ons: Poten9al Landmines
• Cer7fica7on For Individual Unit Financing • Lender Requirement For Financing • Loan Level Cer7fica7on • Investor Ownership • Units in Arrears • Owner Occupancy Percentage Verified
• Pre-‐Sale Cer7fica7on • Required for New Construc7on, New Gut and Non-‐Gut Rehab Conversions
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FHA Project Cer9fica9ons: Lender Affidavits
Join us for our webinar Wednesday, November 9, to discuss new Fannie Mae Condo Guideline
Changes
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Fannie Mae Guideline Changes
Thank you for your interest!
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Comments & Ques9ons
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