FHA CONDOMINIUM FINANCING UPDATE
As you may be aware we have obtained FHA Project Approval for a number of condominium communities. Some have not been able to submit applications because they were unable to meet all the criteria imposed by FHA.
We are pleased to report that recently we got word that finally FHA has relented on several of the troublesome application issues that CAI and others have been working on. FHA modified the Certification so that the signer no longer certifies that they will advise FHA of any changes in circumstances that would disqualify the project after approval. FHA substituted “to the best of my knowledge” at the appropriate spot where it used to be unqualified. The penalty for false statements remains. It has been and remains my opinion that proof of intent or gross negligence would be required. Enforcement would be rare, as you can well imagine, given the shortage of resources available to pursue such in the great scheme of things….probably way behind Medicare fraud. This was a great breakthrough achieved primarily by the relentless pursuit of it by the Government Affairs Office of the Community Associations Institute.
It is equally significant that FHA made the following changes to the requirements for qualification:
(i) No more than 15% of the units can be 60 days delinquent vs. 30 days (this should help more associations qualify since there are typically more owners 30 days delinquent than 60 days),
(ii) No more than 50% of the units can be owned by any one individual or entity (used to be 10%). This is a huge help as many developers still own large numbers of units. If they rent units they count toward that 50% (formerly 10%) and thus often caused projects not to qualify. In most cases developers own and rent significantly less than 50%.
(iii) A project is considered an existing project after 1 year (it used to be 2 years) - existing projects are easier to get qualified than new construction.
These changes will expire on August 31, 2014 unless extended at that time.
Should you have questions about the above information please do not hesitate to email us or give us a call.
The Community Associations Law Team