1. New
FHA
Condo
Guidelines
Issued:
What
You
Need
to
Know
Presented
by:
Orest
Tomaselli,
CEO
Na7onal
Condo
Advisors,
LLC
10/26/11
1

2. Na9onal
Condo
Advisors,
LLC:
The
na7on’s
premier
condominium
project
approval
service
Na7onalcondoadvisors.com
Ph.
888-­‐726-­‐6361
2

3. New
FHA
Condo
Guidelines:
Presenta9on
Outline
• Established
Condominium
Developments
• New
Condominium
Developments
• Converted
Condominium
Developments
• FHA
Insurance
Requirements
• FHA
Project
Cer7fica7on
3

4. Established
Condominium
Developments:
Overview
• History
• FHA
Overview
• Processing
Op7ons
• Submission
Requirements
• General
Requirements
4

5. Established
Condominium
Developments:
History
• 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
5

6. Established
Condominium
Developments:
FHA
Overview
• 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
6

7. Established
Condominium
Developments:
Processing
Op9ons
• 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
7

8. Established
Condominium
Developments:
Submission
Requirements
• 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
8

9. Established
Condominium
Developments:
General
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
9

10. New
Condominium
Developments:
Overview
• Pre-­‐Sale
• Transfer
of
Control
• Submission
Requirements
• Distressed
Asset
Purchases
10

11. New
Condominium
Developments:
Pre-­‐Sale
• 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
11

12. New
Condominium
Developments:
Transfer
of
Control
• 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
12

13. New
Condominium
Developments:
Submission
Requirements,
Part
1
• 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
13

14. New
Condominium
Developments:
Submission
Requirements,
Part
2
• 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
14

15. New
Condominium
Developments:
Distressed
Asset
Purchases
• 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
15

16. Converted
Condominium
Developments:
Overview
• Non-­‐Gut
Rehab
• Gut
Rehab
• Reserve
Study
Requirements
• Noise
Study
Requirements
16

17. Converted
Condominium
Developments:
Non
Gut
Rehab
Part
1
• 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.
17

18. Converted
Condominium
Developments:
Non
Gut
Rehab
Part
2
• 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
18

19. Converted
Condominium
Developments:
Gut
Rehab
• 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
19

20. Converted
Condominium
Developments:
Reserve
Study
Requirements
• 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
20

21. Converted
Condominium
Developments:
Noise
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
21

22. FHA
Insurance
Requirements:
Overview
• Hazard,
Unit
Owners,
&
Liability
Insurance
• Fidelity
Insurance
• Flood
Insurance
22

23. FHA
Insurance
Requirements:
Hazard,
Unit
Owner,
&
Liability
Hazard
• HOA
Requirement
• 100%
Replacement
Cost
Unit
Owners
Insurance
• Walls
In
Coverage
–
“All-­‐
In”
Coverage
Liability-­‐
$1,000,000
• HOA
Requirement
23

24. FHA
Insurance
Requirements:
Fidelity
Insurance
• 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
24

25. FHA
Insurance
Requirements:
Flood
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.
25

26. FHA
Project
Cer9fica9on:
Overview
• Updated
Compliance
Requirements
• Poten7al
Landmines
• Lender
Affidavits
26

27. FHA
Project
Cer9fica9ons:
Updated
Compliance
Requirements
• 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
27

28. FHA
Project
Cer9fica9ons:
Poten9al
Landmines
• 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)
28

29. FHA
Project
Cer9fica9ons:
Lender
Affidavits
• 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
29

30. Fannie
Mae
Guideline
Changes
Join
us
for
our
webinar
Wednesday,
November
9,
to
discuss
new
Fannie
Mae
Condo
Guideline
Changes
30

31. Comments
&
Ques9ons
Thank
you
for
your
interest!
31

32. Copyright
Informa9on
Copyright
©
2011
Na7onal
Condo
Advisors,
LLC.
All
rights
reserved.
Unless
otherwise
indicated,
all
materials
on
these
pages
are
copyrighted
by
Na7onal
Condo
Advisors,
LLC.
No
part
of
these
pages,
either
text
or
image
may
be
used
for
any
purpose
other
than
personal
use.
Therefore,
reproduc7on,
modifica7on,
storage
in
a
retrieval
system
or
retransmission,
in
any
form
or
by
any
means,
electronic,
mechanical
or
otherwise,
for
reasons
other
than
personal
use,
is
strictly
prohibited
without
prior
wriZen
permission.
32