CONDOMINIUM PROJECT APPROVAL and PROCESSING …

1 CONDOMINIUM . PROJECT APPROVAL . and PROCESSING GUIDE. June 30 , 2011. Table of Contents INTRODUCTION. Chapter 1: PROJECT APPROVAL Process and General requirements Overview .. 6. APPROVAL PROCESSING Options .. 7. HRAP/DELRAP PROJECT 7. Eligible/Ineligible 11. PROJECT Types .. 12. Newly Converted Conversions ..13. Cooperative to CONDOMINIUM Conversions ..16. Proposed, Under Construction, Gut-Rehabilitation Conversions PROJECT Phasing ..17. Environmental Review requirements ..17. Unique Projects ..19. Site Manufactured housing CONDOMINIUM Projects (MHCP)..19. Change in Sponsor Ownership Projects Requiring Special Consideration.

2 20. Auctions ..24. Affordable housing ..25. Deed Restrictions ..25. Restrictions on Leasing ..26. Recreational Leases ..26. 2-4 Unit requirements ..27. Condemnation and Total or Partial Loss or Destruction ..28. Transfer of Control ..28. Record Retention Chapter 2: PROJECT Eligibility Basic requirements ..29. Minimum Number of Units ..29. Right of First Refusal ..29. 2. Non-Residential/Commercial Space ..29. Investor Ownership ..30. Delinquent Homeowners Association (HOA) Dues ..31. Budget/Financial Documents ..32. Special Assessments ..33. Pending Litigation ..33. Insurance requirements ..34. Determining the Need for Flood Insurance.

3 36. Recordation of Documents ..36. Existing/ CONDOMINIUM Conversions ..37. Proposed or Under Construction ..37. Annexations/Adding Phases ..37. Recertification of Approved PROJECT ..37. Proposed, Under Construction, Gut-Rehabilitation Conversion Documentation requirements ..38. Legal Phasing ..39. Rejected or Withdrawn Projects ..39. Recertification PROJECT Certification ..42. Chapter 3: Loan Level requirements Case Number Case Number Cancellation ..43. Mortgage Insurance for Individual Unit Financing ..43. Pre-Sale requirements ..43. Owner-Occupancy requirements ..43. FHA Concentration ..44. Insurance requirements .

4 45. Hazard ..45. Flood ..46. HO-6 Walls-In Interior Insurance ..46. Proposed, Under Construction, Gut-Rehabilitation Conversion Documentation requirements ..46. Temporary/Conditional Certificate of Section 203(k) CONDOMINIUM Home Equity Conversion Mortgages (HECMS) ..49. FHA-to-FHA Transactions ..49. Loan Level Certification ..48. Site 3. Manufactured housing Condominiums ..51. Chapter 4: Liabilities and Monitoring Mortgagee Liability ..52. Mortgagee Liability Second and Subsequent Mortgagee's Internal Quality Control Requirement ..52. Quality Assurance ..53. False Certifications ..53. Chapter 5: Systems CONDOMINIUM PROJECT APPROVAL Process.

5 54. FHA Connection Authorization for CONDOMINIUM Projects ..54. Getting CONDOMINIUM PROJECT Information ..54. Establishing a CONDOMINIUM Adding a Phase ..65. Updating Existing CONDOMINIUM PROJECT Information ..66. CONDOMINIUM PROJECT Recertification and Full PROJECT APPROVAL ..66. Chapter 6: Mortgagee System requirements CONDOMINIUM PROJECT APPROVAL Process for Mortgagees ..67. CONDOMINIUM PROJECT Review ..67. FHA Connection Authorization for CONDOMINIUM Projects ..68. Appendices Appendix A: PROJECT Certification ..69. Appendix B: Certification for Individual Unit Appendix C: Glossary ..71. Appendix D: Resources.

6 75. Appendix E-1: CONDOMINIUM APPROVAL Cover Appendix E-2: CONDOMINIUM Recertification/Re- APPROVAL Cover Letter/Document ..85. Appendix E-3: CONDOMINIUM Annexation Cover Letter/Document ..93. Appendix F: CONDOMINIUM Rider ..95. 4. INTRODUCTION. The CONDOMINIUM PROJECT APPROVAL and PROCESSING Guide (Guide) is designed to provide the federal housing administration (FHA) baseline CONDOMINIUM PROJECT APPROVAL and PROCESSING requirements . The contents of this Guide are applicable for all CONDOMINIUM PROJECT approvals where a single unit will be insured under Section 203(b). of the National housing Act. The Guide is designed to provide comprehensive and clarifying guidance for approving CONDOMINIUM projects.

7 Specifically, the Guide: Provides a single source of information for the CONDOMINIUM PROJECT APPROVAL Process;. Consolidates provisions of existing CONDOMINIUM guidance into one source by incorporating the requirements of Mortgagee Letter 2009-46 b, Mortgagee Letter 2009-46 a and the extension thereto, Mortgagee Letter 2011-03;. Clarifies, revises, and updates certain provisions and procedures of the APPROVAL process, as well as expands FHA's flexibility to address individual circumstances on a one-on-one basis;. Discusses basic FHA Connection (FHAC) data entry requirements ; and, Provides additional resources in the Appendices for use by mortgagees, industry members and other interested parties.

8 The information collection requirements contained in this guide are pending APPROVAL by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 3501-3520) and assigned OMB Control Numbers 2502-0141, 2502- 0496, and 2502-0059. In accordance with the Paperwork Reduction Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information, unless the collection displays a currently valid OMB control number. 5. CHAPTER 1: PROJECT APPROVAL PROCESS AND GENERAL. requirements . Overview The housing and Economic Recovery Act of 2008 (HERA) moved the insurance of a CONDOMINIUM unit from section 234 of the National housing Act (NHA) to 203 with the exception of those units that will be insured in a CONDOMINIUM PROJECT that is insured under FHA blanket mortgage insurance.

9 Insurance of units within an FHA-insured PROJECT must be processed and insured according to the requirements of section 234(c). and other applicable policy guidance (HUD Handbook , Home Mortgage Insurance Condominiums; Chapter 11 of HUD Handbook , Valuation Analysis for Home Mortgage Insurance and any Mortgagees Letters that discuss section 234. requirements ). The Mortgagee Letter (ML) and this Guide define the requirements for obtaining, recertifying and maintaining CONDOMINIUM PROJECT APPROVAL . The requirements , as defined, are applicable to forward mortgages and those originated under the Home Equity Conversion Mortgage (HECM) insurance program, more commonly known as a reverse mortgage unless otherwise stated.

10 CONDOMINIUM PROJECT APPROVAL can be issued by FHA staff or by an FHA-approved mortgagee. Mortgagees meeting defined eligibility requirements are authorized to review CONDOMINIUM documentation, determine PROJECT eligibility and certify to compliance with section 203(b) of the NHA and 24 CFR parts 203 of FHA's regulations. Mortgagees will be required to retain all the PROJECT legal documents, contracts, conveyances, plats, plans, insurance coverage, presale and owner occupancy conditions and other associated documentation in connection with their review and APPROVAL or denial of the CONDOMINIUM PROJECT submission.