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New	  FHA	  Condo	  Guidelines	  Issued:	         What	  You	  Need	  to	  Know	             Presented	  by:	  Orest	  Tom...
Na9onal	  Condo	  Advisors,	  LLC:	  The	  na7on’s	  premier	  condominium	          project	  approval	  service	        ...
New	  FHA	  Condo	  Guidelines:	  	  	          Presenta9on	  Outline	  • Established	  Condominium	  Developments	  • New...
Established	  Condominium	  Developments:	                    Overview	    • History	    • FHA	  Overview	    • Processing...
Established	  Condominium	  Developments:	                     History	    • Individual	  ‘spot	  loan’	  approval	  disco...
Established	  Condominium	  Developments:	                  FHA	  Overview	    • Approximately	  30%	  of	  all	  mortgage...
Established	  Condominium	  Developments:	             Processing	  Op9ons	    • HRAP:	  	  HUD	  Review	  and	  Approval	...
Established	  Condominium	  Developments:	          Submission	  Requirements	    • Current	  balance	  sheet	  less	  tha...
Established	  Condominium	  Developments:	            General	  Requirements	    • Right	  of	  First	  Refusal	  is	  per...
New	  Condominium	  Developments:	  	                 Overview	  • Pre-­‐Sale	  	  • Transfer	  of	  Control	  • Submissio...
New	  Condominium	  Developments:	  	                  Pre-­‐Sale	  • 30%	  pre-­‐sale	  	       • Pre-­‐sale	  remains	  ...
New	  Condominium	  Developments:	  	                  Transfer	  of	  Control	  • Transfer	  of	  control	  of	  the	  As...
New	  Condominium	  Developments:	  	           Submission	  Requirements,	  Part	  1	  • Phase	  I	  Environmental	  Site...
New	  Condominium	  Developments:	  	           Submission	  Requirements,	  Part	  2	  • Final	  cer7ficate	  of	  occupan...
New	  Condominium	  Developments:	  	              Distressed	  Asset	  Purchases	  • Bankruptcy/Receivership/Foreclosure/...
Converted	  Condominium	  Developments:	  	                   Overview	   • Non-­‐Gut	  Rehab	   • Gut	  Rehab	  	   • Res...
Converted	  Condominium	  Developments:	  	          Non	  Gut	  Rehab	  Part	  1	   • Project	  must	  have	  recorded	  ...
Converted	  Condominium	  Developments:	  	            Non	  Gut	  Rehab	  Part	  2	  • The	  units	  may	  be	  vacant	  ...
Converted	  Condominium	  Developments:	  	                    	  Gut	  Rehab	  	  • 30%	  pre-­‐sale	       • Pre-­‐sale	...
Converted	  Condominium	  Developments:	  	         Reserve	  Study	  Requirements	  • In	  order	  to	  accurately	  fund...
Converted	  Condominium	  Developments:	  	          Noise	  Study	  Requirements	  • HUD	  requires	  that	  a	  disclosu...
FHA	  Insurance	  Requirements:	                     Overview	  • Hazard,	  Unit	  Owners,	  &	  Liability	  Insurance	  •...
FHA	  Insurance	  Requirements:	              Hazard,	  Unit	  Owner,	  &	  Liability	  	  Hazard	  • HOA	  Requirement	  ...
FHA	  Insurance	  Requirements:	                      Fidelity	  Insurance	  • For	  developments	  with	  more	  than	  2...
FHA	  Insurance	  Requirements:	                       Flood	  Insurance*	  • Coverage	  equal	  to	  replacement	  cost	 ...
FHA	  Project	  Cer9fica9on:	                     Overview	  • Updated	  Compliance	  Requirements	  • Poten7al	  Landmines...
FHA	  Project	  Cer9fica9ons:	         Updated	  Compliance	  Requirements	  • Signing	  the	  project	  cer7fica7on	  • Sta...
FHA	  Project	  Cer9fica9ons:	                         Poten9al	  Landmines	  • Community	  Associa7on	  Loans	       • Are...
FHA	  Project	  Cer9fica9ons:	                        Lender	  Affidavits	  • Cer7fica7on	  For	  Individual	  Unit	  Financin...
Fannie	  Mae	  Guideline	  Changes	  Join	  us	  for	  our	  webinar	  Wednesday,	  November	  9,	  to	  discuss	  new	  F...
Comments	  &	  Ques9ons	  Thank	  you	  for	  your	  interest!	                                                 31	  
Copyright	  Informa9on	  Copyright	  ©	  2011	  Na7onal	  Condo	  Advisors,	  LLC.	  All	  rights	  reserved.	  	  Unless	...
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New FHA Condo Guidelines: What You Need to Know

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Transcript of "New FHA Condo Guidelines: What You Need to Know"

  1. 1. New  FHA  Condo  Guidelines  Issued:   What  You  Need  to  Know   Presented  by:  Orest  Tomaselli,  CEO     Na7onal  Condo  Advisors,  LLC   10/26/11   1  
  2. 2. Na9onal  Condo  Advisors,  LLC:  The  na7on’s  premier  condominium   project  approval  service   Na7onalcondoadvisors.com   Ph.  888-­‐726-­‐6361   2  
  3. 3. New  FHA  Condo  Guidelines:       Presenta9on  Outline  • Established  Condominium  Developments  • New  Condominium  Developments  • Converted  Condominium  Developments  • FHA  Insurance  Requirements  • FHA  Project  Cer7fica7on   3  
  4. 4. Established  Condominium  Developments:   Overview   • History   • FHA  Overview   • Processing  Op7ons   • Submission  Requirements   • General  Requirements   4  
  5. 5. Established  Condominium  Developments:   History   • Individual  ‘spot  loan’  approval  discon7nued   • Project  approval  is  required  for  any  FHA   financing  within  a  condominium  community   • Mortgagee  LeZer  2011-­‐22   • Project  Approval  valid  for  2  years   5  
  6. 6. Established  Condominium  Developments:   FHA  Overview   • Approximately  30%  of  all  mortgage  loans  na7onwide   • Reverse  mortgages  allow  homeowners  above  the  age   of  62  a  unique  op7on  for  financing   • Allows  mortgages  with  lower  down  payment  and   reduced  credit  score  requirements   • Recent  project  approval  withdrawal  has  recently   resulted  in  over  9200  developments  na7onally  that   were  removed  from  the  project  approval  list   6  
  7. 7. Established  Condominium  Developments:   Processing  Op9ons   • HRAP:    HUD  Review  and  Approval  Process   • Reviewed  and  processed  by  FHA  staff   • DELRAP:  Direct  Endorsement  Lender  Review  and   Approval  Process   • Reviewed  and  processed  by  Direct  Endorsement  (DE)   mortgagee  staff   • Must  have  uncondi7onal  DE  authority   7  
  8. 8. Established  Condominium  Developments:   Submission  Requirements   • Current  balance  sheet  less  than  90  days  old   • Current  reserve  balance  evidence  by  bank  statement  from  last  30   days   • Current  year  opera7ng  budget   • Previous  years  financial  statement   • Recorded  condominium  declara7ons,  master  deed,  by-­‐laws,  CCRs   • Recorded  site  plan  and  plat  maps   • Signed  project  cer7fica7on   • Signed  management  agreement   • FEMA  flood  map   • HOA  Tax  ID  Number   8  
  9. 9. Established  Condominium  Developments:   General  Requirements   • Right  of  First  Refusal  is  permiZed  unless  discriminatory   under  Fair  Housing  Act  regula7ons  at  24  CFR  part  100   • At  least  50%  of  the  units  are  owner  occupied   • No  one  investor  can  own  more  than  10%  of  the  units   within  the  development   • No  more  than  15%  of  the  total  units  are  more  than  30   days  past  due  on  HOA  dues.    The  15%  includes  bank   owned  and  vacant  units   9  
  10. 10. New  Condominium  Developments:     Overview  • Pre-­‐Sale    • Transfer  of  Control  • Submission  Requirements  • Distressed  Asset  Purchases   10  
  11. 11. New  Condominium  Developments:     Pre-­‐Sale  • 30%  pre-­‐sale     • Pre-­‐sale  remains  at  30%  for  1st  year  only  from  the   date  of  1st  unit  conveyance  • 50%  pre-­‐sale  aeer  12  months  • 50%  maximum  concentra7on  • Legally  phased  projects  accepted   • Pre-­‐sale  is  based  upon  total  number  of  units  annexed   in  to  the  site   11  
  12. 12. New  Condominium  Developments:     Transfer  of  Control  • Transfer  of  control  of  the  Associa7on  must  occur  no  later  than:   • 120  days  aeer  the  date  by  which  75%  of  the  units  have   been  conveyed  to  the  unit  purchasers;  OR   • 3  years  aeer  the  comple7on  of  the  project  evidenced  by   the  first  conveyance  to  a  unit  purchaser;  OR   • As  required  by  state  law   12  
  13. 13. New  Condominium  Developments:     Submission  Requirements,  Part  1  • Phase  I  Environmental  Site  Assessment,  performed  in  accordance  with  ASTM  E-­‐1527-­‐05,  must  be  included  in  the  project  approval  package  submiZed  to  FHA  if  under  construc7on  or  proposed    • Builder’s  cer7fica7on  of  plans,  specifica7ons  and  site,  form  HUD-­‐92541-­‐required  on  project  and  loan  level  • Builder’s  warranty,  form  HUD-­‐92544  required  on  loan  level  • Building  permit  • Current  site  photographs   13  
  14. 14. New  Condominium  Developments:     Submission  Requirements,  Part  2  • Final  cer7ficate  of  occupancy   • Temporary  CO  accepted  if  corresponding  state  guidelines  allow   for  site  inspec7on  • Reserve  Study  can  be  u7lized  to  prove  accurate  reserve  requirements.   • Reserve  Studies  are  not  required  for  new  construc7on  with   some  excep7ons  • Current  budget  for  declared  phases  • Current  balance  sheet  • Bank  statements  may  be  requested   14  
  15. 15. New  Condominium  Developments:     Distressed  Asset  Purchases  • Bankruptcy/Receivership/Foreclosure/  Deed-­‐in-­‐Lieu  of  Foreclosure   • One  year  aging  required  for  eligibility   • Financial  document  review  to  determine  eligibility   • Reserve  study  required  • Asset  Sale   • 50%  of  declared  units  must  be  owner  occupied     • Reserve  study  required   • Addi7onal  financial  oversight  may  be  requested   15  
  16. 16. Converted  Condominium  Developments:     Overview   • Non-­‐Gut  Rehab   • Gut  Rehab     • Reserve  Study  Requirements   • Noise  Study  Requirements   16  
  17. 17. Converted  Condominium  Developments:     Non  Gut  Rehab  Part  1   • Project  must  have  recorded  legal  documents  prior  to   submission   • 51%  of  the  units  within  the  development  must  be  owner   occupied   • Pre-­‐Sale  must  be  51%  of  the  total  number  of  units  within  the   development   • No  single  en7ty/investor  may  own  more  than  10%  of  the  units   within  the  development   • Developer/Sponsor  is  NOT  considered  an  investor  and  therefore  unsold   units  owned  by  the  sponsor  are  not  to  be  considered  in  this  calcula7on   for  the  first  2  years  from  recorda7on.   17  
  18. 18. Converted  Condominium  Developments:     Non  Gut  Rehab  Part  2  • The  units  may  be  vacant  or  tenant  occupied   • Sponsor/Developer  must  provide  a  comprehensive   marke7ng  strategy  for  units  currently  rented  with  the   excep7on  of  those  rentals  required  by  State  law  • Reserve  study  required  • HRAP  processing  only   18  
  19. 19. Converted  Condominium  Developments:      Gut  Rehab    • 30%  pre-­‐sale   • Pre-­‐sale  remains  at  30%  for  1st  year  only  from  the  date  of  1st  unit   conveyance  and  50%  thereaeer  • Reserve  Study  required:  Newly  Converted   • In  addi7on  to  monthly  contribu7on,  addi7onal  reserve  funding   required  for  any  components  within  the  development  that  require   replacement  within  5  years  of  the  date  of  the  reserve  study  as  defined   by  the  reserve  study  • HRAP  processing  only   19  
  20. 20. Converted  Condominium  Developments:     Reserve  Study  Requirements  • In  order  to  accurately  fund  the  reserve  account  for  a  condominium,  a  reserve  study,  that  is  compliant  with  FHA  guidelines,  can  be  u7lized.     • Can  be  u7lized  to  provide  accurate  reserve  requirements  and  funding   overview.  Determina7on  of  reserve  study,  whether  higher  than  10%  or  lower   than  10%,  may  be  u7lized  as  a  line  item  for  reserve.    • 10%  Line  item  for  reserves   • In  the  absence  of  a  specific  guideline  requiring  a  reserve  study,  a  10%  line   item  within  the  budget  is  to  be  u7lized  • Mandatory  for  newly  converted  gut  rehab  and  non  gut  rehab  condominium   20  
  21. 21. Converted  Condominium  Developments:     Noise  Study  Requirements  • HUD  requires  that  a  disclosure  be  completed  by  the  sponsor/  developer/HOA  that  outlines  the  property’s  loca7on  rela7ve  to  noise  hazards.     • Required  for  newly  constructed  and  newly  converted  gut-­‐  rehab   developments  • Proximi7es  for  proposed,  under  construc7on,  newly  constructed  or  newly  converted  gut-­‐rehab  condos:   • 1000  feet  from  a  heavily  travelled  road   • 3000  feet  from  a  railroad  or  railway   • 1  mile  from  a  civil  airfield   • 5  miles  from  a  military  airfield     21  
  22. 22. FHA  Insurance  Requirements:   Overview  • Hazard,  Unit  Owners,  &  Liability  Insurance  • Fidelity  Insurance  • Flood  Insurance   22  
  23. 23. FHA  Insurance  Requirements:   Hazard,  Unit  Owner,  &  Liability    Hazard  • HOA  Requirement  • 100%  Replacement  Cost  Unit  Owners  Insurance  • Walls  In  Coverage  –  “All-­‐  In”  Coverage  Liability-­‐  $1,000,000  • HOA  Requirement   23  
  24. 24. FHA  Insurance  Requirements:   Fidelity  Insurance  • For  developments  with  more  than  20  units  • HOA  maintained  • If  managed,  insurance  must  specifically  name  the  management  company  within  the  policy  • 3  months  assessments  plus  reserve  funds   24  
  25. 25. FHA  Insurance  Requirements:   Flood  Insurance*  • Coverage  equal  to  replacement  cost  • HOA  required  to  maintain  coverage   • Borrower  or  individual  unit  owner  may  not  obtain   coverage  • LeZer  of  Map  Amendment  (LOMA)  or  LeZer  of  Map  Revision  (LOMR)  must  be  provided  for  all  developments  in  lieu  of  flood  insurance   *if  in  flood  zone.   25  
  26. 26. FHA  Project  Cer9fica9on:   Overview  • Updated  Compliance  Requirements  • Poten7al  Landmines  • Lender  Affidavits   26  
  27. 27. FHA  Project  Cer9fica9ons:   Updated  Compliance  Requirements  • Signing  the  project  cer7fica7on  • State  and  local  law  compliance  cer7fica7on   • Whom  is  qualified  to  make  this  representa7on?  • Ongoing  cer7fica7on  obliga7on   • What  are  the  risks  in  cer7fying  to  ongoing  compliance?  • Up  to  $1,000,000  fine  and  30  years  imprisonment  for  false  or  fraudulent  statements   • Knowing  penal7es  for  fraudulent  cer7fica7on     27  
  28. 28. FHA  Project  Cer9fica9ons:   Poten9al  Landmines  • Community  Associa7on  Loans   • Are  you  automa7cally  rejected  if  your  community  has  a  loan?  • Special  Assessments   • What  will  you  have  to  submit?  • Pending  Li7ga7on     • What  has  to  be  disclosed?   • Statement  must  be  signed  by  aZorney    • Transfer  Fees   • Restraint  on  Aliena7on  (203.41)   28  
  29. 29. FHA  Project  Cer9fica9ons:   Lender  Affidavits  • Cer7fica7on  For  Individual  Unit  Financing   • Lender  Requirement  For  Financing   • Loan  Level  Cer7fica7on   • Investor  Ownership   • Units  in  Arrears   • Owner  Occupancy  Percentage  Verified  • Pre-­‐Sale  Cer7fica7on   • Required  for  New  Construc7on,  New  Gut  and  Non-­‐Gut   Rehab  Conversions   29  
  30. 30. Fannie  Mae  Guideline  Changes  Join  us  for  our  webinar  Wednesday,  November  9,  to  discuss  new  Fannie  Mae  Condo  Guideline   Changes   30  
  31. 31. Comments  &  Ques9ons  Thank  you  for  your  interest!   31  
  32. 32. Copyright  Informa9on  Copyright  ©  2011  Na7onal  Condo  Advisors,  LLC.  All  rights  reserved.    Unless  otherwise  indicated,  all  materials  on  these  pages  are  copyrighted  by  Na7onal  Condo  Advisors,  LLC.  No  part  of  these  pages,  either  text  or  image  may  be  used  for  any  purpose  other  than  personal  use.  Therefore,  reproduc7on,  modifica7on,  storage  in  a  retrieval  system  or  retransmission,  in  any  form  or  by  any  means,  electronic,  mechanical  or  otherwise,  for  reasons  other  than  personal  use,  is  strictly  prohibited  without  prior  wriZen  permission.   32  
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