Dennis' Mortgage Blog

Since Congress passed legislation increasing FHA loan limits our industry has seen a significant portion of FHA financing for purchase transactions.  With the pull back of private mortgage insurance in California, particularly condominium financing, the real estate industry has become more dependent on FHA financing for first time buyer transactions--which make up the highest percentage of home buyers in recent memory.

Part of the process for FHA financing on condominiums has been the ability to obtain "spot approval" for transactions on individual units in complexes that are not on the FHA "Approved" "Withdrawn" or "Denied" lists.  As part of the process during our processing of the mortgage application we have collected data from the Homeowners' Association, title company and appraiser showing the complex meets FHA standards and lenders have issued the spot approval on the individual units when applicable.

Recently HUD released a Mortgagee Letter that announced changes in the condominium approval process.  As part of the process HUD is eliminating the individual unit "spot approval" option later this year, currently October.  At this time many lenders are already pulling back on their participating in the spot approval process for FHA mortgages, as October nears we can expect more lenders to no longer provide the individual unit spot approvals.

Moving forward HUD is allowing lenders that are Direct Endorsed and have the necessary "knowledge and expertise" to approve condominium projects, our reading on this clause thus far however is that lenders will still pass the approval process onto HUD to limit their liability.

My advice on borrowers who need to use FHA financing to purchase condominiums is to try to concentrate searches on units that are FHA approved, or be prepared to submit documentation and apply for complete approval of the complex. 

My advice on listings that are in non-FHA approved complexes is to work with the HOA board and management company to get the complex its HUD approval--and while going through that process parallel a process for VA approval .  This will ensure a broader market of buyers for all the units in the complex in the near and long term.

To see if a condominium complex is approved, go to this link: HUD Condo Approval, enter the appropriate field office, the state and the Condo ID note the ID is the tract number, leave the Status field blank so you can see the status as no status, Approved, Withdrawn or Denied.

If you have any questions please do not hesitate to contact me.

Dennis C. Smith

Stratis Financial Corporation

Dennis@StratisFinancial.com

Direct: 562-472-1118

Mobile: 562-243-6912

Fax: 562-684-4316

DennisCSmith.com 

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