FHA Issues New Condominium Approval Rules

Yesterday, August 14, 2019, the Federal Housing Administration (FHA) issued significant policy revisions to its condominium approval process. In addition to changes to the condominium project approval policy, the new policy provides a “single-unit approval process” for individual condominium units to be eligible for FHA mortgage insurance, even if the condominium project is not FHA approved. In addition, the new guidelines extend the recertification for approved projects from 2 to 3 years and will allow more mixed-use projects to be eligible for FHA insurance.

Here
are a few more specifics as to changes to FHA’s Single Family Handbook:

  1. Single-Unit
    Approval Process
    .
    As of October 15, FHA will insure mortgages for select condo units in projects
    that are not currently approved. An individual unit may be eligible for
    Single-Unit Approval so long as the completed project is not approved and for
    projects with 10 or more units, no more than 10% of the units can be FHA insured
    (for projects with fewer than 10 units, no more than 2 FHA-insured units can be
    FHA insured).
  2. Minimum
    Owner-Occupancy Requirements
    . For most projects, approved condominium
    projects must have a minimum of 50 percent of units occupied by owners.
  3. FHA Insurance
    Concentration in Condominium Projects
    . FHA will only insure up to 50% of total
    units in an approved project.
  4. Commercial/Nonresidential
    Space Limits
    .
    Commercial/non-residential space within an approved condominium project may not
    exceed 35 percent of total floor area.

The new policies take effect October 15, 2019.

A summary of the new rules can be found at this HUD Press Release. For much greater detail, read the FHA Single Family Housing Policy Handbook.

Author: Jim Slaughter
Articles have been Reprinted with permission from Black, Slaughter, Black.

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