News You Can Use

Remember the HUD changes regarding FHA loans on condos?  One aspect overlooked by many is the provision that requires condominium projects to be recertified by HUD every two years.   Condos approved prior to October 2008 were granted a transition period to be recertified.  The expiration of this transition phase is upon us. 

If you are listing or your client is purchasing a condominium, listen up!   Condo projects that obtained FHA approval prior to October 1, 2008, must be recertified by December 7, 2010 or it will lose FHA approval status.   This means a borrower using FHA financing will not be able to close their loan until the recertification is complete (a process that is averaging 45-60 days). 

My advice: 

• Check a condo project’s approval status before listing or submitting an offer if FHA lending is a factor.  Approval expiration date shows a date beyond 12/7/10?  Then laissezles bon temps rouler!
• Project’s approval expiration date showing ‘nearing expiration’?  Contact the HOA to see if they (a) are aware of the expiration and HUD’s requirement then (b) ask if the recertification process has begun.
• If the approval is expired and the HOA has not yet submitted for recertification, share HUD’s Recertification Processing Requirements with them.   Time is of the essence because projects not recertified within six months after the approval expiration date will need full project approval (which requires additional documentation and time).

Accessibility to FHA financing is crucial when marketing a condo because of the high numbers of buyers using this type loan.   If you want to know the status of a condo, feel free to send me the address and development name.  I’ll let you know where it stands and make any recommendations if needed.    I’m here to help so just ask!

UPDATE 12/9/10: Per the MBAC ->

FHA announces extension of condominium project approvals with an expiration date of December 7, 2010. Provided below are the extension dates based on five-year time frames with the exception of those condominium projects with original approval dates from 1972 -1985.

Initial Project Approval Dates     Current Expiration Date        New Expiration Date

1972 – 1980                              December 7, 2010               December 31, 2010

1981 – 1985                              December 7, 2010               December 31, 2010

1986 – 1990                              December 7, 2010               May 31, 2011

1991 – 1995                              December 7, 2010               July 31, 2011

1996 – 2000                              December 7, 2010               August 31, 2011

2001 – 2005                              December 7, 2010               September 30, 2011

2006 – 2008 (Sept)                    December 7, 2010               March 31, 2011

The extensions were granted to reduce the impact of processing and reviewing the number of project approvals expiring at the same time while recognizing current housing market conditions.  Lenders and/or other interested parties are encouraged to begin the re-approval or recertification process as early as possible as it is not anticipated that any further extensions of project approvals will be issued.

The Condominium look-up page and the FHA Connection databases were updated on December 7, 2010 and now reflect the extended expiration dates.  The links to the sites are:

Condominium look-up page: https://entp.hud.gov/idapp/html/condlook.cfm

FHA Connection: https://entp.hud.gov/clas/index.cfm

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News You Can Use

The housing marketing has certainly taken it on the chin this year; however, the condo market has had it even harder – several black eyes and maybe a sucker punch or two. Part of what made the condo market tough is how tight lending and mortgage insurance guidelines have become.  As Benjamin Franklin said “when the well is dry, we learn the worth of water” - folks, it’s about to rain changes for condo lending, so get ready.

Starting February 1^st the FHA condo changes may be just what this market needs.  ‘Spot approvals’ as we know them will go away and in its place will be a centralized list of approved HUD condo projects.  The FHA concentration within a project is increasing – from 10% to 50%, and in some cases up to 100%.  Presolds in new projects are being reduced to 30% as well. Many speculate that these changes will breathe new life into the condo market and I certainly agree.

Some of the condo questions I hear are buyers asking ‘what type of financing is available to me?’ and REALTORS asking ‘how can I best market this condo?’   If you’re considering purchasing or listing a condo, please review this handy checklistto get an overview of current condo guidelines and as always, ask any questions you have.

In this holiday shortened week there are seven economic reports that are likely to impact rates.  We should see the most movement on Tuesday and Wednesday.

Featured Loan Program

USDA

USDA has changed how it calculates the maximum income limits. What this means is that families who previously made too much to qualify for USDA now may! Cunningham & Company offers USDA loans to help low-income individuals or households purchase homes.

• 100% Financing with no Mortgage Insurance
• No Loan Limit
• Property and borrower’s income must meet program guidelines
• May be used for new or existing properties
• Areas in and around the Charlotte MSA are eligible

Have you heard?

Have you heard that Charlotte’s culinary extravaganza – aka Charlotte Restaurant Week – will be back in January?  Rumor has it that Charlotte’s best restaurants will offer the signature 3-course, $30/person prix fixe dinner January 22nd – 31st. Website with details including list of restaurants goes live New Years Day. Bon appetit!

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This year brought many changes to condo lending which has led to questions and confusion:

Buyers ask: ‘what type of financing is available to me?’
Sellers ask: ‘how do I get my home sold?’
REALTORS ask: ‘how can I best market this condo?’

So buyers before you consider putting a contract on a condo and agents before you decide to take a listing, consider these questions.

1. Is the condo an existing project or new project? – If Less than 90% of the units in a complex have sold once – the project is considered new; there are significant restrictions for financing new condo developments (see a professional lenders advice)
2. Has the condo board been turned over to the owners?  If not this is an issue
3. Are more than 30% of the total units in the condo development being rented?  If more than 30% then no MI Company will write a policy on the property.  FHA will allow up to 50% rentals.
4. Are more than 15% of the HOA dues behind 30-days or more? If so this is an issue and will preclude financing – this includes Fannie Mae Limited Review.
5. Does Any Single Entity own more than 10% of the units?  If so this will disqualify the project.
6. Does the project have adequate reserves for maintenance?  Adequate reserves will (1) include allocations/line items to ensure sufficient funds are available to maintain and preserve all amenities and features unique to the condominium project; (2) provide for the funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 10% of the budget; and (3) provide adequate funding for insurance coverage and deductibles.
7. Is liability insurance in place providing at least $l Million of coverage for bodily injury and property damage per-occurrence?  This is required
8. Is hazard insurance in place to cover 100% of the insurable replacement cost of the project improvements, including the individual units? (The deductible amount must not exceed 5% of the policy’s face amount). Required

And as always if you have specific questions, ask me – I’m here to help