Changes in FHA Guidelines
An update from Sergey Petrov at Yalnes on the recent changes to FHA guidelines:
Dear Clients, Friends, and Colleagues:
The lending industry continues to change and tighten its guidelines. You may have heard about the most recent FHA requirements. Historically, a borrower could obtain an FHA-insured mortgage for a purchase of a condominium Unit by either purchasing in an Association already approved by FHA or by going through a â€œSpot Approval Processâ€. In a â€œSpot Approval Processâ€, the lender will request a separate disclosure statement and a â€œtruck loadâ€ of Association documents (copies of budgets, financials, governing documents, insurance policies, reserve studies, etc.) â€“ we, as a management firm, generally complete the disclosure and provide requested documents on behalf of our clients. It takes lenders a few days to review all documents and decide whether or not a particular transaction qualifies for an FHA-insured mortgage. FHA is revoking the â€œSpot Approval Processâ€ and implementing stricter qualification requirements.
We have been following this closely and will continue to monitor upcoming developments. There are a few things to consider including but not limited to funding requirements for reserves and insurance deductibles, delinquencies, insurance coverage, up-to-date reserve studies, etc. If the Association is not currently on the FHA pre-approved list, the board of directors may consider going through the approval process (cost of approximately $3k in application fees, legal reviews, etc.) We are not yet sure how long it will take lenders to go through the new approval process for Associations which are not on the list, but it might greatly delay the selling process of a Unit.
Attached for your review is a brief summary of upcoming changes prepared by Community Associations Institute. We will do our best to keep you updated on the changes in the lending industry. For our clients, we are making necessary provisions in the draft budgets for 2010 and continue to monitor overall compliance with the ever-changing guidelines.
Sergey A. Petrov, PCAM
The attachment is A FAQ on FHA Condominium Guidelines.