CONDOMINIUM PROJECT APPROVAL and PROCESSING GUIDE

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).

2 19. Change in Sponsor Ownership Projects Requiring Special Consideration ..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.

3 31. Budget/Financial Documents ..32. Special Assessments ..33. Pending Litigation ..33. Insurance Requirements ..34. Determining the Need for Flood Insurance ..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 Rejected or Withdrawn Projects ..39.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.

4 43. Mortgage Insurance for Individual Unit Financing ..43. Pre-Sale Requirements ..43. Owner-Occupancy Requirements ..43. FHA Concentration ..44. Insurance Requirements ..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.

5 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 ..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 .

6 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 ..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.

7 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. Specifically, the GUIDE : Provides a single source of information for the CONDOMINIUM PROJECT APPROVAL Process.

8 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.

9 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.

10 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. 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.)