FHA Certification of Condominium Projects

New Changes, July, 2016: 

A new federal law (the Housing Opportunity through Modernization Act) requires the FHA to modify its certification requirements for condominium project to make recertifications substantially less burdensome than original certifications.  The FHA must consider lengthening the time between certifications for approved properties and allowing information to be updated rather than resubmitted.  Currently, FHA requires recertification by a condominium project every two years.  

FHA must allow transfers fees in the same way the Federal Housing Finance Agency (FHFA) allows transfer fees for Fannie Mae Freddie Mac loans.

The required percentage of units that must be owner occupied will be lowered from 50% to 35%.  (specifically, FHA must issue guidance regarding the percentage of units that must be occupied by the owners (or sold to owners intending to meet such occupancy requirements) in order for a condominium to be eligible for FHA mortgage insurance.  If the guidance is not issued within 90 days of enactment of this bill: (1) at least 35% of all family units must be occupied by the owners or sold to owners who intend to meet the occupancy requirement, and (2) the FHA may increase the requirement for a project on a project-by-project or regional basis after considering factors relating to the economy of the locality in which the project is located.)

A HUD field office must make decisions regarding exemptions to current FHA commercial space requirements and must consider factors relating to the economy of the locality in which the project is located.

Mortgagee Letter 2012-18

Mortgagee Letter 2012-18 (ML) from HUD puts in place temporary condominium project approval guideline changes to some of the current FHA condominium approval policy provisions. These changes replace, for the period specified by this ML, certain approval requirements specifically identified in this ML that were established in ML 11-22 and the attached Condominium Project Approval and Processing Guide
(extended to August 31, 2017 by Mortgagee Letter 2016-13, modified by Mortgagee Letter 2015-27).

Requirements for FHA Certification of a Condominium Project:

HUD requires the following from a condominium project in order to be FHA certified: