September 19, 2012
The FHA and HUD recently updated condo project approval guidelines in the Mortgagee Letter 2012-18.
The mortgagee letter states, “It was determined that certain policy adjustments were needed to address current housing market conditions”.
The letter adds, “This ML is effective for all condominium project approvals,recertifications, annexations or reconsiderations submitted for review as of the date of this directive unless otherwise specified in a particular information block. This approval process will apply until August 31, 2014, unless further extended by FHA.”
Part of the revised guidelines for condo project approval? Investor ownership rules. Under the section title, “Investor Ownership Section 2.1.4” you’ll find the following:
“The requirements of Section 2.1.4, Investor Ownership are replaced by the following updated policy guidance.
A unit that is occupied as a principal residence is not considered as an investment property. When calculating the investor owned percentage, this unit will not be included in the calculation.”
FHA loan rules, as of this mortgagee letter, now state that for all existing or non-gut rehab condo projects, “any investor/entity (single or multiple owner entities) may own up to 50 percent of the total units at the time of project approval if at least 50 percent of the total units in the project have been conveyed or are under a bona fide contract for purchase to owner-occupant principal residence purchasers.”
Additionally, “Unoccupied and unsold units owned by a builder/developer are not considered as investor owned and subject to the requirements unless the unit is currently rented or has previously been occupied.”
There are also guidelines for non-profits and non-government housing programs in this area. “Eligible non-profit and/or eligible governmental housing programs are subject to the same investor and owner-occupied percentage requirements stated above. An eligible governmental or non-profit program means a program designed to assist the purchase of low-or-moderate-income housing including rental housing that is operated pursuant to a program established by Federal law, operated by a State or local government, or operated by an eligible non-profit organization as defined by the Department?s current guidelines.”
For more information, see the FHA Mortgagee Letter 2012-18 on the FHA official site.
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Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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