FINANCING NEEDS

FHA Loans and Mort­gage Programs

Great 30 year fixed rate for first home buy­ers with 3% down pay­ment Down Pay­ment — and the down pay­ment can be 100% gift from a fam­ily mem­ber or Down Pay­ment
Assis­tance Pro­gram such as Ameridream.  Fair to mar­ginal credit his­tory is needed with min­i­mum 580 score.  FHA will look mostly at the  pre­vi­ous 1–2 years of credit his­tory.  If there are some credit issues, we may be able to over­come them with suf­fi­cient expla­na­tions and sup­port­ing doc­u­men­ta­tion (com­pen­sat­ing fac­tors) as to why the deroga­tory credit occurred.  The expla­na­tions must make sense such as loss of job, seri­ous ill­ness, etc.

Bank­ruptcy must be dis­charged 2 years and an excel­lent re-established credit his­tory is needed since the BK.  Revolv­ing and install­ment loans and/or non-traditional credit accounts such as rent, util­i­ties, car insur­ance, cell phone, etc. can be uti­lized for qual­i­fy­ing pur­poses.  No Credit His­tory is occa­sion­ally per­mit­ted but only if a doc­u­mented 12 month non-traditional credit his­tory of ver­i­fi­able accounts such as rent, util­i­ties, car insur­ance, can be illus­trated.  Col­lec­tions and judge­ments must be paid off prior to clos­ing except for med­ical collections.

FHA guide­lines do not require delin­quent accounts to be paid. How­ever, investors and lenders will and their guide­lines supercede those of FHA.  Espe­cially within the last 9 months of credit tight­en­ing, this pol­icy would not have loos­ened regard­less of the amount of time since the delin­quency occurred. The guides state if the aggre­gate total is
$5000 or more for col­lec­tions, they must all be paid. Less than $5000 total is at the underwriter’s dis­cre­tion as to what and how much gets paid…and how that dis­cre­tion usu­ally goes is for the accounts to be paid regard­less. Any open/currently active accounts that are past due must be brought cur­rent. No investors dif­fer in FHA allow­able rules. Call FHA direct and ask them some ques­tions. (800) 225‑5342

FHA Con­do­mini­ums — Condo  “Spot” approvals or Full Approvals

Con­dos requir­ing spot approval require a ton of work and there is no guar­an­tee that they will be approved. The biggest hur­dle is lan­guage con­tained within the association’s dec­la­ra­tions that has to be reviewed. Since the infu­sion of the new bill and the FED decid­ing to back mort­gages to help off­set the hous­ing cri­sis, FHA is prob­a­bly going to be more lenient on con­dos in the near future. How­ever, this is not cur­rently the case. Pro­vid­ing an address to us will allow us to deter­mine if the project is on the FHA approved list.

As of June 12th, 2009, spot approvals are no longer avail­able accord­ing to Arti­cle 2009–19, sec­tion IV, item B.  Prior to, the fol­low­ing require­ments must be sat­is­fied before a
spot loan is endorsed:

The con­do­minium project must be com­plete.
There should be no ongo­ing or antic­i­pated addi­tion of any units, com­mon ele­ments, and/or facilities.

Con­trol of the com­mon areas of the project must have been turned over to
the unit own­ers asso­ci­a­tion for at least one year.

The own­ers asso­ci­a­tion must pro­vide evi­dence that the project has
the appro­pri­ate haz­ard, lia­bil­ity and flood insur­ance.

Indi­vid­ual units in the project must be owned in fee sim­ple or be
an eli­gi­ble lease­hold interest.

The project’s legal doc­u­ments must pro­vide for undi­vided own­er­ship of com­mon areas by unit own­ers. By virtue of this own­er­ship, unit own­ers must have the right to use all facil­i­ties and unre­stricted com­mon elements.

The project’s doc­u­ments should not place any legal restric­tions on con­veyance. Any pro­vi­sions that seek to limit the free trans­fer­abil­ity of title is gen­er­ally unac­cept­able. Such restric­tions include rights of first refusal and restric­tive covenants. Cer­tain gov­ern­men­tal or non­profit pro­grams designed to assist in the pur­chase or rental of low-or moderate-income hous­ing are exempted from the restric­tions on con­veyance pro­vi­sions. The Department’s pol­icy on the free assum­a­bil­ity and trans­fer­abil­ity of prop­erty is
set forth in 24 CFR 234.66.

At least 90% of the units in the project must have been sold. At least 51% of the units in the project must be owner– occu­pied. No sin­gle entity may own more than 10% of the units in a project. “Entity” includes an indi­vid­ual part­ner­ship, cor­po­ra­tion, lim­ited lia­bil­ity com­pany, lim­ited lia­bil­ity part­ner­ship, joint ven­ture, investor group or other nat­ural or legal per­son qual­i­fied to hold an inter­est in real prop­erty. The 10% restric­tion does not apply when the own­er­ship of less than three units would dis­qual­ify an oth­er­wise eli­gi­ble project.

The Depart­ment rec­og­nized that the 10% cap on the num­ber of units that may secure FHA insured mort­gages in a given project can place a small regime at a dis­ad­van­tage, since only a few units will invoke the limit. Accord­ingly, a two– tiered sys­tem was estab­lished. For con­do­minium projects hav­ing more than 30 units, no more than 10% of the units may have FHA insured loans at any given time. Con­do­minium projects con­sist­ing of 30 units or less, can have up to 20% of the units encum­bered by FHA insured mort­gages under the spot loan rule.

Mort­gage lenders under­writ­ing spot loans must per­form suf­fi­cient inves­ti­ga­tion and analy­sis to cer­tify that the con­do­minium project sat­is­fies the eli­gi­bil­ity cri­te­ria. Under the reg­u­la­tions, mort­gage lenders may employ a wide range of approaches to ascer­tain com­pli­ance with the spot loan require­ments. Project devel­op­ers, apprais­ers, own­ers, asso­ci­a­tions, man­age­ment com­pa­nies and real estate bro­kers are among the sources of infor­ma­tion lenders may use. To the extent that the Depart­ment has infor­ma­tion that can be of assis­tance, it will pro­vide mort­gagees with that infor­ma­tion. How­ever, it remains the lender’s respon­si­bil­ity to ensure the accu­racy of the infor­ma­tion it relies upon in mak­ing its cer­ti­fi­ca­tion.

The stan­dard Direct Endorse­ment Under­writer Cer­ti­fi­ca­tions applic­a­ble to con­do­mini­ums under stan­dard loan pro­grams and the HECM pro­gram are not suf­fi­cient for spot loan appli­ca­tions. Some mod­i­fi­ca­tion is needed. Accord­ingly, the fol­low­ing cer­ti­fi­ca­tion is added to the list of Direct Endorse­ment (DE) cer­ti­fi­ca­tions in Appen­dix 3 of Hand­book 4000.4, Rev. 1, Ch. 1 and to the list of Under­writer Cer­ti­fi­ca­tion (HECM) in Appen­dix 3A of Mort­gagee Let­ter 95–54 :

The prop­erty is in a project that has not received prior approval by HUD but the require­ments of 26 CFR 234.26(i) are met.

This cer­ti­fi­ca­tion require­ment will be in effect for all mort­gages exe­cuted on or after 30 days from the date of this Mort­gagee Let­ter. A sim­i­lar state­ment may be used until the require­ment for a cer­ti­fi­ca­tion becomes effective.

Local HUD Offices and Regional Pro­cess­ing Cen­ters will con­duct ran­dom reviews of mort­gage loans insured under the spot loan pro­gram. Mort­gage Lenders demon­strat­ing a pat­tern of abuse will be sub­ject to those enforce­ment mech­a­nisms and sanc­tions gov­ern­ing FHA mort­gage insur­ance activity.

The spot loan pro­gram is designed to relieve a bur­den on home­buy­ers in successfully-operating, non-approved con­do­minium projects where FHA involve­ment is lim­ited; it must not be used to cir­cum­vent the gen­eral require­ment that a con­do­minium project be approved before a mort­gage on any unit in that project can be endorsed for insur­ance. As pre­vi­ously noted, the approval require­ments for con­do­minium projects are found in 24 CFR 234.26, (a)-(h). Addi­tional require­ments are set forth in Chap­ter 11, HUD Hand­book 4150.1 Rev 1, enti­tled “Val­u­a­tion Analy­sis for Home Mort­gage Insur­ance” and reit­er­ated in HUD Hand­book 4265.1, enti­tled “Home Mort­gage Insur­ance — Con­do­minium Units — Sec­tion 234©”.

Below was a sug­gested check­list to use in deter­min­ing if the project is FHA allow­able. It reflected some key con­sid­er­a­tions in assess­ing the eli­gi­bil­ity of a project
for spot loans.

_______ 1. The legal doc­u­ments of the home­own­ers asso­ci­a­tion do not con­tain a right of first refusal or restric­tive covenant.

_______ 2. The unit is part of a con­do­minium regime that pro­vides for com­mon and undi­vided own­er­ship of com­mon areas by unit owners.

_______ 3. The project, includ­ing the com­mon ele­ments, and those of any Mas­ter Asso­ci­a­tion, are com­plete, and the project is not sub­ject to addi­tional phas­ing or annexation.

______ 4. (a) There are no spe­cial assess­ments pending.

______ (b) No legal action is pend­ing against the con­do­minium asso­ci­a­tion, or its offi­cers or directors.

______ 5. The com­mon areas have been under the con­trol of the home­own­ers asso­ci­a­tion for at least one year.

______ 6. At least 90 per­cent of the total units in the project have been sold.
Ver­i­fied by _________________________.

______ 7. At least 51 per­cent of the total units in the project are owner-occupied.
Ver­i­fied by ______________________.

______ 8. There are no adverse envi­ron­men­tal fac­tors affect­ing the project as a whole or indi­vid­ual units .

______ 9. No sin­gle entity owns more than 10 per­cent of the total units in the project. Ver­i­fied by ______________________.

______ 10. The units in the project are owned in fee sim­ple or the units are held under a lease­hold accept­able to FHA. Lease­hold in file.

______ 11. The own­ers asso­ci­a­tion has ade­quate com­mon area insur­ance cov­er­age. Gen­eral lia­bil­ity, replace­ment cov­er­age, etc. reflects the char­ac­ter, ameni­ties and risks of the par­tic­u­lar devel­op­ment. Flood and other insur­ances car­ried, when applicable.

______ 12. Gen­eral main­te­nance level of com­mon ele­ments is accept­able and there is no deferred main­te­nance, based on the com­ments by the Appraiser and/or the pictures.

______ 13. The own­ers asso­ci­a­tion has a reserve plan and a reserve fund, sep­a­rate from the oper­at­ing account, that is ade­quate to pre­vent deferred main­te­nance. The amount of the fund is $_________ as of __________.

_______14. (a) For projects con­sist­ing of over 30 units, no more than 10 per­cent of the total units are encum­bered by FHA insured mortgages.

_______ (b) For projects con­sist­ing of 30 units or less, no more than 20 per­cent of the total units are encum­bered by FHA insured mort­gages.

(Mort­gagee)	(Reviewer)
(Address)ss)	(Title)
(Date)
(Con­do­minium Project Name)	(FHA case number)
(Address)