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FHA Release New Temporary Approval Provisions for Condo Approval Process

January 17, 2013

On September 13, 2012, FHA released  Mortgagee Letter 2012-18: Temporary Approval Provisions for the Federal Housing Administration Condominium Project Approval Process. The Mortgagee Letter replaces existing policy until FHA publishes formal regulations expected in 2014.

NAR had been working with HUD for years on these changes, and had worked with Congress to try and influence HUD to loosen condo regulations. These new rules do not solve all of the issues, but do include some improvements such as:

  1. The increase in investor ownership percentage for existing projects,
  2. The change in the definition of delinquent HOA dues from 30 days past due to 60 days past due,

  3. The softening of the language in the project certification statement and
  4. Greater flexibility on the percentage of non-residential use in a project.

We were disappointed that HUD did not reinstate the previous FHA condominium spot loan program, whereby an individual condo unit in a non-FHA approved project can be eligible for FHA financing if certain requirements are met. We would suspect that not having a FHA condominium spot loan program available to buyers in older condo projects that do not have FHA project approval is adversely affecting a significant number of potential home buyers and particularly first time buyers.

We are also disappointed they did not address the owner/occupancy ratio but will continue to work with Congress and our coalition partners to get these items back on HUD's radar.

View a more detailed explanation of the new rules.

HUD Condominium Project Approval and Processing Guide