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RE Industry trade groups estimate up to 30%
of Condo Projects are ineligible for HUD/FHA Financing…
That number will grow to 50% within 9 months!!
Fannie Mae Project Approvals
Effective February 1, 2010, FHA followed the lead of Fannie Mae /Freddie Mac by implementing new & more stringent lender standards for condo projects. Since 2009, 50% of all loans are FHA--and that number is growing daily.
HUD/ FHA eliminated the “spot approval” process for individual units & instead based approvals on the entire condominium project.
These more stringent standards have effectively rendered many projects ineligible for ANY type of lending…leaving only cash buyers as an option for many sellers. (less than 10% of the “RETAIL PURCHASE OFFERS).
The consequences are obvious: lost RE/ lending commissions, depreciating values & more REOs have caused a general level of frustration that has permeated the condo market.
The most common reasons for condo projects not meeting HUD standards are:
1) Owner Occupancy - Owner occupancy must be greater than 50% at the time of underwriting to be FHA eligible.
2) Delinquencies - No more than 15% of the units in a project can be 30 days or longer delinquent in their HOA dues.
3) Investor ownership - One entity, be it individual, corporation or trust may not own more than 10% of the units within an association. This becomes more of a problem the smaller the number of units in the project is.
4) FHA concentration - No more than 50% of the units within an association may be FHA insured.
5) Litigation - There can be no pending litigation that can adversely affect the association (such as construction defect, embezzlement, etc.) Collection & foreclosure litigation does not make an association ineligible.
In addition to many projects being ineligible, this phenomenon only becomes more acute with all the projects in the county having to recertify their eligibility.
Initial Project Approval Dates Current Expiration Date New Expiration Date
1972 – 1980 December 31, 2010
December 7, 2010 December 31, 2010
1981 – 1985
December 7, 2010 December 31, 2010
1986 – 1990
December 7, 2010 May 31, 2011
1991 – 1995
December 7, 2010 July 31, 2011
1996 – 2000
December 7, 2010 August 31, 2011
2001 – 2005
December 7, 2010 September 30, 2011
2006 – 2008
Sept December 7, 2010 March 31, 2011
The Advantages of FHA loans are:
Easier Qualifying: Higher Debt ratios (55% vs. 45% for conventional loans)
Lower credit score: (640 vs. 680 for conventional loans)
Lower down payment: (3.5% vs. 20% for conventional loans)
Higher Loan Limits: ($793,750 [depending on region] vs. $729,750 for conventional loans
Technically FHA loans are “Assumable”: (all conventional loans contain “Due on Sale Clause“whereas FHA loans have a clause that allows a new buyer to “take subject to” [i.e. lender approval…so the loan CAN be assumed by a new buyer].
What to Do
Typically, the condo association itself will initiate the approval process.
Individual buyers or sellers can begin the approval process as well.
Current owners, even if not selling, may wish to refi & often encourage their HOA to apply, since certification will lead tohigher sales prices for units.
Those buyers/homeowners/associations (for whatever reason) not comfortable with the process can contract with a private service company.
The industry leader is FHA PROS. Call 818 338-6588. FHA specialists will ask a few simple questions about your association.
If your project is a good candidate for FHA approval (the minimum requirements are met), they will send you a contract & invoice.
The minimum documentation can be obtained by requesting it from your management association:
1) HOA Cert Current Budget
2) Last Year's Budget, HOA Balance Sheet to show all funds on deposit & available
3) CC&R's (including all amendments)
4) Bylaws (including all amendments)
5) Articles of Incorporation (including all amendments)
6) Master Insurance Policy & should include a Title Company FARM report & Plat map to show how many unit's in the project & how many have FHA financing.
Upon receipt of the items, signed contract & payment, FHA Pros will send a detailed list of the documents required for the HUD submission, tailored for your association.
Once they receive the documents, FHA PROS will do all the rest.
Costs
A $1,500 processing fee plus $500 legal fee* total = $2,000. *A client can use their own attorney in lieu of paying the legal fee.
There’s a discount for associations referred by a C.A.R. member: $1,200 processing fee plus $300 legal fee* total: $1,500.
According to my sources FHA PROS will be officially endorsed by CAR in a January announcement.
For additional information or to get the FHA approval process started, please call the CLARUS FHA Approval support line at (818) 338-6588.
In Closing
I publish these informational e-blasts and host my agent friendly web site with the intention of earning your loan business.
My business model is old school. It's working hand-in-hand with agents to close transactions & make you look good.
Do you have a borrower shopping for a loan (refi or purchase)?
I’ll meet with your client personally, shake their hand, & ask for their business. I’ll provide you & & the borrower with:
1)"DU" loan approval with a max. purchase price in just 24 hours.
2) An Interest Rate Quote (On line or over the phone).
3) A complete Good Faith Estimate of Closing Costs.
4) Free N.O.D & T.S. Listing Leads…As a listing agent or buyers broker, if you know who’s motivated to sell their home ....it’s just a matter of getting there first with the best presentation.
I’ll provide you with "real time" data. All data reports are formatted in “Excel” & convertible to “label ready”.
5) Condo Association Approval …Do you have listings or buyers seeking to sell/or purchase in an ineligible condo project? I can help.
Call me and let’s talk about we work together to earn a commission by getting that project approved.
6) Open House Flyers (Excel Spreadsheet). With just 5 clicks of your mouse you can customize, calculate & download different purchase prices, down payments & monthly payments for “open houses”.
7) Free Forms…..Includes leases, grant & quit claim deeds, power of attorney etc. (50 helpful forms to help you get a commission check).
Loan Programs
20% Down ....No Tax Returns,W-2s or Paystubs Required! Available to salaried/ hourly wage earners only; No “SE” borrowers!!!
No Equity Required “Move Up”(or “Move Down”) Buyers... Available Jan, 1st 2001 (call me now for info)
High Debt Ratio FHA Loans…… New investors are aggressively entering the market place & competing for a bigger a share of the FHA pie. These new investors are approving loans up to 55% DTI.
Flipped Property Financing… “Fix & Flip & Refi / Cash Out” your property up to double its purchase price in 180 days…. Financing for up to 10 properties.
1/2% Down Financing Mediocre Credit "OK" (640 Fico score).
203K REHAB Loans $35K "cash out” for home improvement …. See my 9 minute audio power point webinar for specific information.
Industry Information
Homeowners Due Refunds from Lenders… Many homeowners are due thousands of dollars in refunds because of new HUD guidelines that prevent lenders from "over withholding" funds in a borrower "impound account." Click on the above link to get the refund process started.
IRS Help Hotline…Don't let your short sale get bogged down because a seller can't find their returns. Get past years returns faxed in just minutes directly from the IRS.
Loan Mod Programs—There’s are always new state & federal loan programs coming down the pipe. I keep you current.
Webinars
Raising Credit Scores--a 19 minute audio visual presentation on how to boost credit scores in just 45 days.
Attracting Buyers to Your Website--a 15 minute audio power point presentation specifically tailored for Real Estate Agents & Brokers!!
Call me!!! I’d like to opportunity to earn your business!
Daniel Dobbs
Sr. Mortgage Loan Officer
American Commerce Mortgage
4676 Lakeview Ave #212
Yorba Linda, Ca 92886
(just 1 block from the Nixon Library)
Cell: 949 250-3981 Fax (714) 970-9777
Dandobbs6@gmail.com
DRE # 00986886 …..NMLS# 307631
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