As of February 1, 2010 all FHA case numbers (a number assigned to the property once a loan application has been submitted) issued on or after February 1 of this year, all previous FHA condo approvals will be done away with and condo projects must be recertified by HUD and “start from scratch”!
Trying to buy a condo in this market may be harder than it seems because the condo project must be approved by HUD or one of HUD’s approved lenders.
Who is the Department of Housing and Urban Development
“ The department of the U.S. federal government that institutes and administers all federal programs dealing with better housing, urban renewal, and metropolitan planning. Abbreviation: HUD”
Unless you have cash to purchase a condo obtaining financing will be very difficult because of these new guidelines. The re-approval process will “bog” down the system for approving condo projects therefore slowing down or eliminating the ability to purchase a condo. Cash purchases are not affected by these guidelines since there is no mortgage insurance required for cash deals.
After February 1, 2010 there will only be two ways to get a condo project approved:
1) The Homeowner’s Association (HOA) will have to submit their expanded condo certification directly to FHA (Federal Housing Administration) and await the “slow” approval process which can take up to 3-6 months. This method of approval is known as the HUD Review and Approval Process (H-RAP)
2) HUD Approved Lenders or Direct Endorsement Lenders will have the authority based on their knowledge and expertise in reviewing and approving condo projects through this method known as the Direct Endorsement Lender – Approval and Review Process (DEL-RAP). They will be required to successfully submit five test projects to HUD; fortunately the authorized lender can close a loan prior to completing the five condo test cases and receiving HUD’s approval.
The biggest concern regarding the 2nd method of condo project approval is the liability to the Direct Endorsement Lender. Once these lenders are authorized by HUD to approve condo projects on their own the lenders will be responsible for all future loans in their approved condo projects. It will be difficult to find lenders who are willing to accept this liability.
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