The question of FHA Condo rules limiting this loan program in Las Vegas, Nevada is a valid question. It is in my opinion these new rule changes will make it harder to use FHA loan program for the purchase of Condos in Las Vegas, Nevada.
The first major rule change is there will be two FHA Condo project Approval process that will be accepted.
1. The HUD Review and Approval Process or HRAP has now been added a new process.
2. The new FHA Condo Rules allow Direct Endorsement Lender Review and approval process or DELRAP will allow the lender that have a unconditional Direct Endorsement authority the ability to approve or disapprove condo projects. DELRAP will be required to Direct Endorser and will be required to maintain staff with the knowledge and expertise to in reviewing and approving condominium's projects.
FHA Condo Rules require the lender to decide which of these two approval process it will use.
If the lender accepts the FHA Condo rule of DELRAP the lender will do the following.
1 DELRAP lenders must provide the condominiums approval or denial documents within 5 business days in PDF format through the FHA Connections.
2. Environmental reviews will not be required unless the appraiser identifies a environmental condition or the master certification addresses a issue. Issues that could trigger a environmental review.
A. The project is in a Special Flood Hazard area on a Federal Emergency Management Agency flood
B. Noise issue: Property is is 1000 FT of a highway, or busy street, or 3000 FT of a railroad, or 1 mile
from a airport or 5 miles from a military airfield.
C. Located 2000 FT from any facility handling or storing explosives or fire prone materials.
D. Property is within 3000 feet of a dump or landfill or is near a site on the Super Fund map.
FHA Condo Rules eligibility requirements for approval:
- Minimum number of units 2 or more.
- Must have Hazard and Liability insurance and Flood insurance if applicable.
- Right of first refusal is allowed unless it is discriminatory.
- Commercial space can not exceed 25% of floor space.
- No more then 10% of the units may be owned by one investor and includes builders and developers.
- No more then 15% of total units HOA can be in arrears more then 30 days.
- Pre sales at least 50% of total units must be sold prior to endorsements.
- Owner occupancy ratios must be 50% or more owner occupied.
- FHA concentration or FHA loans in any Condo Project will be limited to 30%.
- Budget reviews to make sure adequate funds and must have 10% reserves.
In the new FHA Condo rules if the project was rejected or withdrawn <12 months new documents can be submitted under the HRAP process. the same can be done if reject or withdrawn projects for 12> months.
Under the new FHA Condo Rules Condominium's projects will expire every two years from the date of original placement and will require re-certification. This will require Owner Occupancy and insure FHA is not at risk due to inadequate HOA reserves or pending special assessments and Insurance.
The new FHA Condo Rule change will move all currently approved projects and the FHA Connection database to the new approval list. FHA Condo Approvals that were done prior to October 1, 2008 will require to be re-certified by December 7, 2010.
The most compelling issue with the new FHA Condo Rule change is that during the lenders approval process if using either the HRAP or the DELRAP approval List and they find a problem on any of the conditional requirements to get Condo Approval and doe not disclose to FHA their discovery they are liable to FHA and may be fined up to $1,000,000.00 and up to 30 years in Jail. All loans for a FHA Condo the lender will have to sign a Lender certification to condominium Requirement letter stating and accepting the above responsibility.
John Le Francois
Direct Access Lending
650 White Dr Suite 200
Las Vegas, NV. 89119