FHA Lending Changes as of 12/7/09

Posted on November 13th, 2009 in All Articles.

The following lending changes will be taking place as of 12/7/09:

“Spot Loan” Approval Process
FHA will eliminate the Spot Loan Approval Process effective on or after December 7, 2009. However, to address concerns involving the volatility in the condominium market, the new effective date for the elimination of this practice is for all FHA case number assignments on or after February 1, 2010.

FHA Concentration Requirements:
FHA concentration requirement will be increased temporarily to 50 percent.
Exceptions to 50 percent Concentration Level. The FHA concentration may be increased up to 100 percent if the project meets all of the basic condominium standards plus the additional items stated below:
• The project is 100 percent complete and construction has been completed for at least one year, as evidenced by issuance of the final or temporary/conditional certificate of occupancy for last unit conveyed;www.hud.gov espanol.hud.gov2
• 100 percent of the units have been sold and no entity owns more than 10 percent of the units in the project (for projects with fewer than 10 units, single entity may own no more than 1 unit);
• The project’s budget provides for the funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 10% of the budget;
• Control of the Homeowners Association has transferred to the owners
• The owner-occupancy ratio is at least 50 percent.

Note: New construction and conversions are not eligible for this exception.

Owner-Occupancy Requirements
At least 50 percent of the units in a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction, or projects still in their initial marketing period, FHA will allow a minimum owner occupancy amount equal to 50 percent of the number of presold units.

Vacant or tenant-occupied real estate owned (REOs), including properties that are bank owned, may be excluded from the calculation of the required owner-occupancy percentage (should be removed from both the numerator and denominator).

Pre-Sale Requirements
In the case of new construction, the pre-sale requirement will be reduced temporarily to 30 percent.

The pre-sale percentage must be documented as follows:
• Copies of sales agreements and evidence that a mortgagee is willing to make the loan;
• Evidence that units have closed and are occupied; OR
• Information from a developer/builder that lists all of the units already sold, under contract, or closed (e.g. a spreadsheet, chart, or listing used for the company’s own tracking purposes) that is accompanied by a signed certification from the developer.