HUD's Federal Housing Administration (FHA)
The U.S. Department of Housing and Urban Development oversees the Federal Housing Administration whose goal is to promote affordable and fair housing. HUD offers FHA insurance to private lenders to encourage them to make more condo loans. FHA insured mortgage loans offer the lowest down payment (3.5%), the least restrictive credit requirements of any loans available today, and 3% seller concessions. For this reason, they have become the most popular mortgage for condo buyers. Nearly 50% of all condo mortgages utilitize FHA backed guarantees.
Each condo project must now become approved by HUD to have any future mortgage backed by the FHA. The approval isn't for one unit, it's for the entire condominium project. There are no longer any "spot" approvals. And the thousands of projects that used to be approved are having that approval expire during 2011 and now need to reapply. HUD is not sending out notices about this, primarily because they don't have contact information. Unless your condo project has been formally approved in the last 2 years, your approval expires this year.
HUD's approvals are good for 2 years after which each project must get recertified. Once the entire project is approved, individual loans can then be guaranteed. However, once a project's approval expires, no new case numbers can be issued. Many projects are finding out the hard way that their approval expired, leaving many contracts in limbo with sellers and buyers surprised and angry.
We recommend you check the status of your complex at: HUD's approved condo list
Mortgage losses that the FHA incurred on condos in Florida, Las Vegas, and other "sand states" forced the FHA to tighten their rules for condo project approvals. On June 30th, 2011, HUD issued another mortgagee letter that has tightened the requirements even further. These requirements are extensive and more challenging to fulfill. They affect reserve study requirements, pre-sale requirements, loan concentration limits, owner occupancy percentages, Association budget and reserves, fair housing, rights of first refusal, levels of delinquency, declarant control, types and levels of insurance, legal phasing, commercial concentration levels, manufactured housing and more. These requirements apply to new project pre-approvals, newly constructed condos, 2-4 unit projects, gut rehab and non-gut rehab conversions, and all re-certifications.
Through the first half of 2011, less than 90 of Texas's over 1,100 HUD projects were re-approved. This is due to a combination of ignorance of the recertification requirement, rejected or withdrawn applications, and the fact about half of the older approvals are due to expire over the remainder of the year. Those that achieve FHA condo approval are sure to have a competitive sales advantage over those that don't.
Nationally, as of July 1, only 4,400 of 41,000 HUD previously approved condos have been reapproved this year. HUD is experiencing a deluge of applications now as people become aware of the new requirements. Submitting an incomplete or noncompliant application can result in long approval delays or worse, a rejection, that may be difficult, timely and costly to overcome. The current approval time frame at HUD is approximately 30 days for new applications.
Texas Condo Approvals (TCA) is here to handle the condo approval process for you. We draw upon our experience to submit a complete and compliant application package to enhance the probability of your project's approval. We understand exactly what is required, know how to present it positively, and will not submit an application until we feel confident it will be approved. Every application we have submitted this year has been approved!
Re-certification - To ensure previously approved condo projects are still appropriate to insure, the FHA requires all condo projects to be recertified every two years. Projects originally approved before January 1, 2000 will have to complete a full project application. Those approved between Jan 1 2000 and Oct 1 2008 can apply for recertification. Condos may begin recertifying up to six months before their expiration and up to six months afterward. If approval is not done within six months of the expiration, a new and full application will be required. The table below indicates when existing certifications expire.
| Original Certification Date | Expiration Date |
|---|---|
| Before 1986 | December 31, 2010 |
| 1986 - 1990 | May 31, 2011 |
| 1991 - 1995 | July 31, 2011 |
| 1996 - 2000 | August 31, 2011 |
| 2001 - 2005 | September 30, 2011 |
| 2006 - September 2008 | March 31, 2011 |
We recommend you check the status of your complex at: HUD's approved condo list
Texas Condo Approvals charges $1,500 for new and conversion project submissions, $1,250 for re-certification of projects not originally submitted by TCA, $500 for subsequent legal phase submissions, and $500 for subsequent re-certifications of projects submitted by TCA under the current requirements. We offer discounts for multiple projects or one project submitted to multiple government agencies.