Condo Update
September 29, 2009
FHA announced they are extending the deadline for spot approvals to October 31, 2009 - all case numbers must be assigned by Oct 31, 2009 to qualify.
Just a quick reminders of FHA Spot approval needs:
- 3.5% down payment
- 51% Owner Occupied
- 90% of all units sold and closed
- No single entity may own 10% of all the units
- No more than 25% of the total square footage can be commercial
- Adequate insurance is required (see below)
- No more than 10% of the units (if 30 or less units then = 20%) may have FHA financing - please remember that most closing prior to 2008 would not be FHA typically
- There are no special assessments pending
- No law suites against the HOA
- HOA must have adequate reserves for the condo and the project must have no deferred maintenance
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For Non-FHA buyers Fannie Mae has a spot approval process for qualified borrowers. They must have above a 680 score typically and this is for established projects only.
CONDOMINIUM LIMITED REVIEW
*for conventional conforming loans*
Available for Established Projects Only
AUS DU Approve/Eligible Only
Established Project Definition
· All units and common areas in the project are 100% complete; and
· The project is not subject to additional phasing or additions; and
· At least 90% of the total units in the project have been conveyed (sold and closed) to unit purchasers other than the developer; and
· The unit owners control the homeowners association.
If your project fits the definition of an established project-proceed to the next step.
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LIMITED REVIEW REQUIREMENTS FOR ESTABLISHED CONDOMINIUM PROJECTS
· DU findings must allow for Limited Review Process
· Project must meet the definition of an established project
· Primary residence maximum LTV is 90%
· Second home maximum LTV is 75%
· No investment properties
· Project is not part of a manufactured home project
· Project is not an ineligible project per FNMA
· Project must meet the insurance requirements for Hazard, Liability, Flood and Fidelity Bond. (see below)
If all of the above requirements are met, the condominium project will be reflected as Limited Review Type Q-Established Project
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**Important** Fannie Mae limited review for Established Projects cannot be utilized when the Lender has targeted the project with specific marketing efforts or is named as the preferred lender by either the developer or the project’s homeowner’s association.
Additional requirements for a project consisting of 2-4 Units
· No single entity may own more than one unit within the project;
· All units, common elements, and facilities within the project must be 100% complete;
· All but one unit in the project must have been conveyed to owner-occupant principal residence or second home purchasers; and
· The units in the project must be owned in fee simple, and the unit owners must be the sole owners of, and have rights to the use of, the project’s facilities, common elements, and limited common elements.
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Insurance Requirements:
(1) Hazard: blanket all risk policy with 100% replacement, deductible not to exceed 5% of policy face amount
(2) Liability: coverage must be $1 Million per occurrence
(3) Flood Insurance: lesser of 100% of insurable value or maximum coverage allowed per NFIP ;coverage of each unit should be the lesser of $250,000 or the amount of its replacement cost (I.e., the replacement cost of all units combined or the number of units x $250,000);deductible not to exceed $25,000 per building located in the flood zone
(4) Fidelity Bond: required for projects with over 20 units, coverage must be In amount sufficient to cover three months of HOA dues or meets requirements of state law.
Condominium project insurance master or blanket policies containing either of the following are prohibited:
· A blanket policy that covers multiple unaffiliated condominium associations or projects, or
· A self Insurance arrangement whereby the owners' association is self insured or has banded together with other unaffiliated associations to self Insure all of the general / and limited common elements of the various associations.
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