The US Department of Housing and Urban Development issued new condominium lending guidelines that go into effect Dec. 7, 2009. However, the agency is making several temporary exceptions to the new rules due to the "volatility" in the condo market.
The new Federal Housing Administration (FHA) policies included in ML 09-46 B cap the number of condo units in a building that can be financed with FHA insured loans at 30%. Also, 50% of the units must be owner occupied in order to be eligible for FHA financing.However, ML 09-46 A allows exceptions to the FHA concentration and owner occupancy requirements until Dec. 31, 2010.
HUD is also extending “Spot Loan Approvals” due to concerns about the condo market and the new effective date for the elimination of the practice is for all FHA case number assignments on or after February 1, 2010.
Reverse mortgage lenders have voiced concern over the risk involved with their DE underwriters authorizing a condo without proper guidance from HUD, so hopefully the new ML will help alleviate those concerns.
According to ML 09-46 B, lenders will have two condominium project approval processing options. The applicable documentation requirements will be the same for each option:
- HUD Review and Approval Process (HRAP).
- Direct Endorsement Lender Review and Approval Process (DELRAP). This option is only available to lenders who have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects.
Under DELRAP, lenders must provide the condominium approval or denial documents to FHA within five (5) business days of final disposition. These documents must be uploaded using pdf format through FHA Connection.
You can read more about the new process here.