IMPORTANT UPDATE: 11/16/09: FHA Issues Final Revised Condominium Lending Guidelines
The FHA has announced that it will again delay the implementation of the new regulations governing condominium mortgages until December 7th, 2009. The new regulations were initially proposed in June and would change the approval process and the criteria used to determine if a buyer can obtain a FHA mortgage on a condominium. The proposal would replace the current spot approval process with a new comprehensive approval process under which approvals would be good for two years.
On October 21st, FHA stated in an email:
Implementation of FHA’s new policy guidance for condominium project approval and condo unit financing will be delayed until December 7th 2009. The new guidance, to be issued within the next two weeks, will: 1) offer additional leniencies to address the difficult market conditions and 2) augment some portions of FHA Mortgagee Letter 2009-19, providing additional information and clarification.
Until the new guidance takes effect on December 7th, 2009 lenders may continue to use the Spot Loan Approval guidance issued in Mortgagee Letter 1996-41. Further, the site condo and manufactured housing condo project changes that have already been implemented are not affected by this delay.
See my prior post for a comprehensive review of the changes.
There has been a frenzied lobbying effort by condominium groups led by the Community Associations Institute and lenders to suggest ways to improve the proposed regulations in a manner that would both mitigate FHA exposure to bad mortgage debt and set realistic benchmarks for condominium associations to qualify for project approval under FHA financing mechanisms. The FHA’s delay may be attributed to sorting through all the concerns about the new, stricter guidelines.
