FHA & Condominiums

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

This week I wanted to take some time to discuss FHA and condominium guidelines and requirements. Since condominiums are becoming more popular across the country, I think this information will be helpful to you if you are new to FHA or if you are in need of a refresher on condominium requirements.

There are two types of condominium approvals for FHA:

· Full project review and approval by HUD
· Spot loan review and approval by the lender

The first step with any condominium loan is to determine the name of the condominium project and conduct a search at HUD’s website to see if the project is currently approved. You’ll need to go to https://entp.hud.gov/idapp/html/condlook.cfm where you can search by condo name, condo id, alias name, city, state or zip code. Back when I was processing, I always found it helpful to keep a report of all of the approved condominium projects for my state right in my desktop binder so I had it for quick reference at all times.

If the search concludes that the project is indeed approved, you will need to print the search screen and include it with your submission to underwriting. It’s also helpful to include it with your appraisal order to the appraiser.

If the search concludes that the project is not currently approved, you would want to do one of two things:

1. Determine if the property is eligible for spot loan review and approval or
2. Determine if it’s best to gather project documentation and submit to the HUD Homeownership Center that oversees the jurisdiction of the property for full project review and approval.

For Spot Loan Approval

To proceed with spot loan approval, you would want to refer to Mortgagee Letter 1996-41 which explains spot loan approval requirements. You will find a spot loan questionnaire/checklist attached to ML 96-41. You will need to have an officer of the condominium project’s homeowners association or a representative from the company that oversees and manages the association complete the spot loan questionnaire as early in the process as possible. With the completed spot loan questionnaire, you will need to obtain a copy of the association’s most recent annual budget and you will need to obtain a copy of the certificate of insurance for the subject unit of the project. The association must have appropriate insurance coverage for the common areas and exteriors of the buildings within the project.

Most lenders also require a copy of the condominium declarations and bylaws to be submitted with the questionnaire, annual budget and certificate of insurance for the subject unit. You will want to check the specific lender procedures for spot loan approval because some lenders actually employ their own department for project reviews and approval. Most underwriters are able to determine project acceptability at the same time they underwrite the rest of your credit package but there are a few that differ in their processes. Make sure you’re clear up front on the exact process with the lender of choice.

One thing worth mentioning that you will not find within the Mortgagee Letter or the questionnaire: To be eligible for spot loan approval, the project must consist of no less than four units. This eliminates two unit duplexes and three unit triplexes which have been zoned as condominiums from being eligible for spot approval. (Many folks learn that one the hard way- me included many years back!)

For full project review and approval

For cases where a particular originator has the potential to land a number of deals within the subject project, HUD advises pursuing full project approval. You will find full condominium project requirements at CFR-234.26(i) and also in HUD handbook 4150.1 Chapter 11. Each HUD Homeownership Center has their own specific project review process so you will want to be clear on what to include in your project submission, where to send the documents and to whose attention you need to address the documents.

I recently researched the requirements of each HOC and here is what I was able to determine:

ATLANTA HOC for the states of Alabama, Florida, Georgia, Kentucky, Illinois, Indiana, Mississippi, North Carolina, South Carolina, and Tennessee, as well as the Caribbean

Refer to HUD Handbook 4150.1 Chapter 11 for required exhibits and submit your project review packages to:
Atlanta Homeownership Center
Five Points Plaza,
Suite 900
40 Marietta Street
Atlanta, GA 30303-2806

The states of FL, NC, SC, TN need to submit their packages to Attention: Tech Support Branch 1
The states of AL, GA, Il, IN, KY or MS need to submit their packages to Attention: Tech Support Branch 2

You’ll find a helpful directory of contacts and direct phone numbers for Atlanta HOC staff members at http://www.hud.gov/offices/hsg/sfh/talk/atlaorg.cfm.
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DENVER HOC for the states of Arkansas, Colorado, Iowa, Kansas, Louisiana, Missouri, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Wisconsin, Wyoming and Utah

Visit Denver HOC’s Condominium Processing & Approvals website at http://www.hud.gov/local/tx/library/archives/2005-07-11condo.cfm.

Refer to simplified checklists for the 17-state Denver HOC at http://www.hud.gov/offices/hsg/sfh/circ/den/denfha10.pdf.

Submit all project review packages to the Fort Worth HUD office at
HUD - Single Family
801 Cherry Street,
25th Floor
Fort Worth, TX 76102

You may wish to call 817-978-6024 with questions on Denver HOC condominium approval processes.
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PHILADELPHIA HOC for the states of Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia

Refer to HUD Handbook 4150.1 Chapter 11 for required exhibits and submit your project review packages to:
Philadelphia Homeownership Center
Attention Technical Branch
100 Penn Square East
Philadelphia PA 19107

You may wish to visit Phili HOC’s website at http://www.hud.gov/offices/hsg/sfh/talk/addr_phi.cfm
or call 1-800-225-5342 with questions on Phili’s condo project review processes.
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SANTA ANA HOC for the state of Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon and Washington. We also serve the Pacific Islands of American Samoa, Guam, and the Commonwealth of the Northern Marianas

Refer to HUD Handbook 4150.1 Chapter 11 for required exhibits and submit your project review packages to:
Santa Ana Homeownership Center
Attention Technical Branch
Santa Ana Federal Building
34 Civic Center Plaza, Room 7015
Santa Ana, CA 92701-4003

You may wish to visit Santa Ana’s website at http://www.hud.gov/offices/hsg/sfh/talk/addr_sna.cfm
Or call 1-800-225-5342 with questions on Santa Ana’s condo project review processes.
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I would expect that with the explosion of FHA volume across the country, turn times on project review may not be timely. I would most certainly recommend contacting the Homeownership Center that oversees your jurisdiction ahead of time to get an idea of how much time you will need to allot for standard project review and approval.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.