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FHA is Effectively Getting Out of Insuring Condo Loans

Effective February 1, 2010

This is a big one. Effective for all case numbers issued on or after February 1 of this year, all previous FHA condo approvals will be eliminated and condominium projects must be recertified by HUD.

You can pretty much forget about buying a condo until the project has been blessed by HUD or one of HUD’s approved lenders.

This will bottleneck HUD and will effectively shut down condo sales until these units are HUD approved. This is a nationwide ruling.

FHA eliminated their Spot Approval process on Feb. 1.

Going forward there will be two approval methods for FHA Case numbers ordered after February 1, 2010;

Hud Review and Approval Process (H-RAP)

DE Lender-Approval and Review Process (DEL-RAP)

H-RAP

After February 1, 2009 FHA will approve condo projects based on an expanded Condo Cert sent directly from the Home Owners Associations. This could be a very slow process based on typical government efficiency and typically incomplete certifications from HOA's. Time will tell.

DEL-RAP

Direct Endorsement Lenders will be authorized to approve condo projects on their own after qualifying by successfully submitting five test projects to HUD.

As I see it the problem is; once lenders are ok' d by HUD approve condo projects on their own the lenders will be on the hook for all future loans in their approved projects. I can't think of any lenders who would accept this liability.