In June, HUD released Mortgagee Letter 2009-19 providing guidance on the new FHA approval process for Condominium projects. The letter allows lenders to determine project eligibility, review project documentation and certify to compliance of Section 203(b) of the National Housing Act and 24 CFR 203 of HUD’s regulations. This new approval process was to be effective for all case numbers assigned on or after Oct. 1, 2009. However, FHA recently told lenders that the new effective date is Dec. 7, 2009. The site condo and manufactured housing condo project changes that have already taken effect are not affected by this delay.

Before the new effective date, NAHB expects that several changes will be made to the policy as originally stated in Mortgagee Letter 2009-19. For example, FHA has stated that the concentration limit for FHA-insured loans in a project will be increased to 50% from the previously stated 30%. In addition, the pre-sale requirement will be reduced to 30% from 51%. Other changes are expected regarding the transfer of control to the condo owners association and the acceptance of temporary certificates of occupancy.

There are a number of complex and confusing issues, which have not been addressed publicly by HUD/FHA staff. If they become effective, these policy changes would have a highly detrimental impact on potential purchasers of condominiums, which are frequently the most affordable way to achieve homeownership.

Joe Robson, NAHB’s 2009 Chairman, expressed grave concerns regarding this matter to FHA Commissioner David Stevens at a meeting on Sept. 2. Commissioner Stevens was also questioned by members following his presentation to NAHB’s Executive Board on Sept. 30. In a follow-up letter to Commissioner Stevens, Mr. Robson offered to convene a stakeholder meeting to work with HUD staff to develop a more workable set of policies to help FHA mitigate the condo-related risk it perceives.

NAHB will continue to monitor this situation.

For more information, e-mail Bill Renner, or call him at 800-368-5242 x8597. [Return to top]