The Mortgage Industry

FHA Extends Temporary Condominium Rules, NAR Calls for Additional Enhancements

Posted on Saturday, January 15, 2011

The US Department of Housing and Urban Development (HUD) released Mortgagee Letter 2011-03, which extends the temporary guidance for condominium rules through June 30, 2011. NAR has been calling for an extension of the temporary measures for several months and recommended additional enhancements to the condominium rules. This week, National Association of REALTORS® (NAR) President Ron Phipps sent a letter to FHA Commissioner Dave Stevens commending the agency for recent program enhancements, including hiring FHA's first Credit Risk Officer, which resulted in great improvements to loan performance in the Mutual Mortgage Insurance Fund (MMIF). FHA's purchase activity appears to be performing as well as any period since Neighborhood Watch was established and condominium loans appear to be performing even better. Mr. Phipps called on FHA to make additional enhancements to the condominium rules and re-evaluate the proposed rule that would reduce permitted seller concessions to 3 percent.

Mortgagee Letter 2011-03 extends and clarifies temporary guidance announced in Mortgagee Letter 2009-46 A. The temporary guidance 1) increases Federal Housing Administration (FHA) concentration requirements to 50 percent, 2) requires 50 percent of units in a project to be owner-occupied but vacant and REO property are not considered in the calculation of the owner-occupancy percentage, 3) reduces the pre-sale requirement to 30 percent, 4) all projects in Florida are required to be reviewed under the HUD Review and Approval Process (HRAP), and 5) Spot Loans are extended through February 1, 2010. The temporary guidance is effective for all FHA case numbers assigned through June 30, 2011. The Spot Loan Approval Process was eliminated on February 1, 2010, and is not extended.

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