Whether you’re going for an HRAP (i.e. through FHA) or DELRAP (i.e. through an authorized FHA-delegate lender such as the Ethical Homes team) approval, the necessary documents are the same. Full details are included in FHA’s mortgagee letters 2009-46A and 2009-46B, and further clarified in mortgagee letter 2011-21; however, here’s a brief overview of the documents that need to be included for all existing condo developments:

• Most recent HOA budget

• Most recent HOA financial statements

• Copy of HOA master insurance policy

• Recorded condo/plat map indicating legal description

• Recorded condo site plans

• Recorded condo declarations and any or all annexations and amendments that apply

• Copy of executed and adopted condo by-laws

• Articles of Incorporation as filed

• FEMA Flood Certification Form

• Outstanding/Pending Litigation Analysis

• Special Assessments Analysis

• Last Two HOA Meeting Minutes

• HOA management agreement, or if self-managed, a letter on HOA letterhead indicating that fact

In addition, the application should include the following information:

• Number of units in development that are currently bank-owned REO

• HOA tax ID number

• Month & Year that condo was completed

• Standard FHA certification questionnaire

(The above documents are for existing condo developments that have been complete for more than 12 months; developments that were recently completed or that are still under construction will usually have more extensive documentation requirements.)

Have more questions about the process of applying for FHA certification?

If you’d like to submit a DELRAP application, the Ethical Homes team would be glad to assist you; just contact us and we can get the process started.

If you’d like to submit an HRAP application, we unfortunately can’t assist you directly; however, we’d be glad to refer you to attorneys who are able to do so. Again, just contact us and we can get you started on the way to getting your condo development certified.

Possibly related posts (automatically generated):

1. How To Get A Condo Development Approved For FHA Financing
2. HUD Increases FHA Mortgage Insurance Premiums
3. Condos With High Investor Ratios

There are four key points to the new system of approving condos that are important to understand:

• First, HUD did away with what were known as “spot” approvals, where individuals looking to purchase a unit in a condo development could get approved for FHA financing even if the development as a whole was not approved; instead, the only way that anyone can be eligible for FHA financing for a unit in a condo development is if the condo development as a whole is on the approved list.

• Second, since the FHA approval status of a condo development affects everyone involved–buyers looking to purchase units in the development using FHA financing, homeowners already in the development who want to sell to those buyers, agents and lenders looking to facilitate those transactions, as well as the condo association (which should usually be protecting the interests of the unit owners by keeping the condo development FHA approved, which increases the number of buyers who can purchase units in the development, which in turn increases demand there and helps support property values for the unit owners)–any interested party is in theory allowed to submit an application to get the entire condominium development approved.

  However, it’s important to keep in mind that for technical reasons, no application can successfully be submitted without the cooperation of the Board of Directors of the condo association, as well as any management company that the Board may have retained to help manage the association. It’s essential that any interested party get complete buy-in from those entities before spending time and money to attempt to get a condo association approved; while it’s almost always in the best interests of the unit owners (and thus, in theory, the Board that represents them) to allow any interested party to get the entire development approved, we’ve recently seen isolated instances where parties such as the management company or attorneys retained by the Board have advised the Board not to cooperate with outside requests to get the condo development FHA-approved–from what we can tell, for no reason other than so that the entities in question could instead charge the association large sums to perform those same tasks on their behalf.

• Third, it’s important to know that HUD now has two pathways that interested parties can follow to process an application for FHA approval of a particular condo development: the HUD Review Approval Process (or HRAP), and the Direct Endorsed Lender Review Approval Process (DELRAP).

  When using HRAP, the application is submitted directly to HUD, who will usually take 6-8 weeks to process it. The HRAP application itself is free, but most of the time interested parties end up incurring significant costs in the form of fees paid to attorneys, management companies, etc., to prepare the application for them.

  When using DELRAP, the application is submitted to a mortgage lender who has been authorized by HUD to process applications on their behalf, and the approval process for DELRAP usually takes about 1-2 weeks. DELRAP generally costs about $500-$1000 (depending on whether the condo development in question is of recent construction and whether it has been previously approved for FHA financing), which is often (but not always) on par with or less than the fees charged by attorneys to handle an HRAP application.

  The documentation needed for an application is the same for both HRAP and DELRAP. For both HRAP and DELRAP, there may also be additional 3rd-party costs involved; for example, condo management companies will often charge fees in the $200-500 range for copies of the documents needed in the application–and they are, sadly, not averse to charging those fees to anyone who needs those documents, including the very associations on whose behalf they are maintaining those documents.

• Finally, under the new system, approval of a condo development for FHA financing expires in 2 years, and approvals issued before the change in rules in 2009 (which were originally permanent approvals) were also changed to expire; as a result, the fact that a condo development was previously on the HUD list of condos approved for FHA financing doesn’t mean that it currently is–agents, buyers, and homeowners are all advised to double-check the current status of a particular condo development before making any decisions regarding buying, selling, or refinancing.

As a general rule of thumb, here’s what we tend to recommend for people considering applying to get a condo development approved for FHA financing, depending on who they are and what their situation is:

• For sellers looking to put a condo on the market, buyers thinking about putting in an offer on a condo, or homeowners looking to refinance a condo, we recommend going with the DELRAP procedure, as most real estate transactions cannot survive the 2+ month delays that HRAP usually entails. As noted above, it’s essential for either DELRAP or HRAP to have the support of the Board of Directors for the process, so we recommend contacting them as soon as possible to make sure that they will cooperate, and if so, to see whether they might be able to initiate the DELRAP process on your behalf and cover the relevant fees. (Note that any FHA certification costs are NOT considered to be closing costs as part of a sale of an individual unit, and cannot appear on a HUD-1 settlement statement: buyers or sellers needing such an approval as part of an active transaction are advised to negotiate contingencies to allow that process to proceed separately from the purchase itself, and will have to pay any associated fees out of pocket if the Board will not cover those costs.)

• For condo associations that are considering getting FHA certification for their condo development, we recommend checking to see how much your attorneys and/or management company will charge to process the application. If that amount is comparable to or higher than the DELRAP fee, then the DELRAP approach usually makes sense; if the cost of attorney’s feed, etc., is less than the DELRAP fee, then HRAP might make more sense. (Depending on your attorney’s level of familiarity with the HRAP process, however, some associations opt to pay a slightly higher fee to go the DELRAP route so that they can be advised by someone who is more familiar with the process.)

Interested in pursuing an HRAP approval? We’ve put together a brief overview of the documents you’ll need to provide as part of your application, and would be glad to refer you to attorneys who can help with filing your application if you need further assistance.

Interested in exploring your options for a DELRAP approval? The Ethical Homes team can process DELRAP applications for you through our wholesale lenders. We do not charge any fees to do so–all you would pay would be the exact DELRAP fee that the wholesale lender is authorized by HUD to charge. Contact us for more details on how to begin that process.

Possibly related posts (automatically generated):

1. Documentation Needed To Get A Condo Development Approved For FHA Financing
2. FHA Announces Extension Of Condo Project Approvals
3. Getting Pre-Approved For A Mortgage

As discussed previously, FHA’s annual MIP will be increasing by 25 bps for all FHA loans with case numbers issued on or after 4/18/11. Buyers and refinancers looking to obtain a mortgage and who have a specific property identified are encouraged to submit an application before that date to ensure that they can take advantage of current lower premiums, which will save borrowers approximately $21/mo for every $100k of their loan.

Possibly related posts (automatically generated):

1. HUD Increases FHA Mortgage Insurance Premiums
2. FHA postpones implementation of mortgage insurance changes
3. Last Chance To Lock In Old FHA Fees

Some of the options that we can currently offer to borrowers who for whatever reason have lower credit scores, and that other lenders may not be able to offer, include:

• FHA Loans to borrowers with FICO scores as low as 530.

• FHA Loans to borrowers with a non-traditional credit history or insufficient credit (i.e. no FICO score at all) with no hit to maximum LTV.

• Manual underwriting of FHA loans (using common sense rather than just algorithms) for borrowers with low FICO scores but a compelling argument for why they would be able to make their payments consistently and on time in the future.

• FHA 203(k) Streamline rehab/construction loans for borrowers with a FICO score of at least 580, allowing borrowers (both purchase and refi) to take out up to $35k extra to put towards improving the property.

• Loans for new construction manufactured homes and mobile homes for borrowers with FICO scores as low as 580, and for existing manufactured homes and mobile homes for borrowers with FICO scores as low as 620.

• One-time-close construction loans (aka Construction-to-Permanent/CTP loans) for manufactured homes, mobile homes, and modular homes (including acquisition of land) for borrowers with FICO scores as low as 580.

• High-balance FHA loans and Jumbo VA loans (in both cases, loan amount > $417,000) for borrowers with FICO scores as low as 620, with no reduction in maximum loan amount or maximum LTV.

Possibly related posts (automatically generated):

1. 2009 FHA loan guideline update
2. What is credit?
3. New Credit Scoring System Not Likely To Be Successful

With an FHA Streamline refi, you can refinance your current mortgage with a new FHA mortgage; in the process, you’ll (usually) get a refund back of a prorated portion of the Upfront Mortgage Insurance Premium (UFMIP) that you paid when you obtained your original mortgage, and often be able to waive many of the fees that would otherwise apply to your new mortgage, resulting in savings of potentially thousands of dollars versus a traditional (non-streamline) refinance of the same mortgage. Streamline refinances also often allow the borrower to skip the appraisal, adding still more savings while also removing the risk of a low appraisal causing issues with the refinance.

In addition, FHA’s guidelines for streamline refinances are much more lenient than the guidelines for most refinances. Most lenders add overlays to FHA’s guidelines, but as a mortgage broker that works with dozens of wholesale lenders, we have access to programs that still follow most of FHA’s more lenient requirements. Among the features that we can offer include:

• No appraisals. Many FHA Streamline lenders do still require appraisals for streamline refinances, even though that is ostensibly one of the biggest appeals of the streamline refinance. Since we can offer true no-appraisal FHA Streamline refinances, we can help many borrowers whose properties whose values have declined and are now “underwater” or otherwise ineligible for a refinance because of property condition/value.

• Condo units & buildings do not need to be FHA approved. Most FHA Streamline lenders require the condo development to be on FHA’s list of approved condos; if they aren’t, the condo association must spend weeks preparing paperwork to apply for approval, and then wait 6-8 weeks (or longer) to get that approval back from FHA. Because we can do FHA Streamline refis without requiring condos to be on the FHA approval list, however, we can avoid those delays, and also do those refinances on condos that wouldn’t be able to get approved because the don’t meet current FHA guidelines.

• Condo associations do not need to complete a condo questionnaire. Most FHA Streamline lenders are requiring these questionnaires even for condos that are already FHA approved, meaning borrowers often have to pay fees to their condo association to have the questionnaire completed, and then based on the contents of those questionnaires, their refinances might be denied because of issues such as a high percentage of units rented out (aka high “investor ratios”), low budget reserves, or ongoing litigation against the condo association. Since we can do FHA Streamline refinances without requiring condo questionnaires, we can avoid those issues entirely.

• No income or employment requirements. Most FHA Streamline lenders insist on all borrowers being currently employed with stable income, meaning many of the people who are in the most need of a refinance to reduce their monthly payments (i.e. those who have lost their job or had their hours/wages reduced) are barred from getting the help that they need. We can originate FHA Streamline refinances without requiring current employment or stable income, so that borrowers who just need some help reducing their payments in order to get back on their feet can do so without getting caught in a Catch-22.

• No debt-to-income ratio (DTI) maximums. Most FHA Streamline lenders have maximum ratios of monthly debt payments vs. current income, which again hurts many of the borrowers who are in most need of a refinance (e.g. ones who have hit a rough patch and needed to use their credit cards more than they would prefer to tide them over). As long as the refinance will provide a “Net Tangible Benefit” to the borrower (e.g. reducing their payment, or getting rid of an adjustable rate to make their payments more stable), we can do FHA Streamline refis without regard to current debt/DTI levels.

Note that many of the features above do result in slightly higher rates for the borrower, so for borrowers who don’t need to take advantage of them, we don’t advise using them just to make the loan process more convenient.

Got an FHA mortgage now, and interested in exploring your options for an FHA Streamline Refinance? Contact us and we’d be glad to go over your scenario with you and see if one might make sense.

Possibly related posts (automatically generated):

1. Guidelines Expanded for HARP
2. Condos With High Investor Ratios
3. FHA Announces Extension Of Condo Project Approvals

HUD Mortgagee Letter 2011-10 (PDF) announces that, effective with all FHA case numbers issued on or after April 18, 2011, the annual MI premium that they will be charging will increase by 25 bps on all FHA-insured loans (including ones such as low-LTV 15-year FHA loans, which previously had no annual MI premium at all).

This increase will translate into a monthly payment for FHA borrowers of approximately 21 cents per month for every $1,000 of the loan amount; e.g. on a $350,000 loan, the monthly payment would increase by roughly $73.50/mo.

Borrowers who have identified a specific property that they would like to purchase or refinance can obtain case numbers prior to the 4/18 cutover and take advantage of the current premiums even if they close on their loan after the new premiums take effect; however, in the same mortgagee letter, HUD emphasizes that borrowers must submit an active application in order to obtain a case number.

Possibly related posts (automatically generated):

1. FHA changes mortgage insurance premiums
2. Reminder About Upcoming FHA MIP Increase
3. FHA postpones implementation of mortgage insurance changes

In order to obtain FHA financing on a condo unit, the condo project in which the unit exists must be approved by FHA. FHA recently switched to a program where those approvals need to be periodically renewed. Condos that had been approved before late 2008 were originally scheduled to have their approvals expire on December 7, 2010; after realizing that having 40 years worth of approvals all expire on the same day could result in FHA being overwhelmed with renewal requests, however, FHA announced plans to stagger the expirations. Today, FHA announced the official schedule that they will be using for those staggered expirations–basically, the new expiration date will be pushed back anywhere from 3 weeks to 9 months, based on the date when the project was initially approved. Provided below are the extended expiration dates:

• Approved 1972-1980: Expire 12/31/10
• Approved 1981-1985: Expire 12/31/10
• Approved 1986-1990: Expire 05/31/11
• Approved 1991-1995: Expire 07/31/11
• Approved 1996-2000: Expire 08/31/11
• Approved 2001-2005: Expire 09/30/11
• Approved 2006-2008 (Sept): Expire 03/31/11

In FHA’s own words:

The extensions were granted to reduce the impact of processing and reviewing the number of project approvals expiring at the same time while recognizing current housing market conditions. Lenders and/or other interested parties are encouraged to begin the re-approval or recertification process as early as possible as it is not anticipated that any further extensions of project approvals will be issued.

Interested parties can determine the expiration date of the FHA approval of a given condo project by looking up the condo development on FHA’s condo lookup web page.

Are you a resident in (or part of the board of) a condo development that you want to get approved or renewed by FHA? If so, contact us and we would be glad to help you get your condo approved. If you’re looking to purchase a unit in a condo development that needs FHA approval or otherwise need that approval processed in less than the 4-8 weeks that FHA is currently taking for processing requests, we can also process FHA approvals ourselves in just 1 week for borrowers using us for their financing.

Possibly related posts (automatically generated):

1. How To Get A Condo Development Approved For FHA Financing
2. Documentation Needed To Get A Condo Development Approved For FHA Financing
3. Condos With High Investor Ratios

Under the new fee structure, FHA borrowers getting 30-year mortgages who are putting down 5% or less will see their monthly payments go up by roughly $23/mo for every $100,000 of money borrowed; for a typical DC-area buyer taking out a $400k loan, that would result in an increase in monthly payments of nearly $100/mo.

The new fees will be applied to all borrowers with FHA casefile numbers issued on or after 10/4/10. Casefile numbers are issued to a specific borrower for a specific property, but do not require having a ratified purchase contract. If you’re thinking of purchasing a specific property or refinancing an existing property using FHA financing, or are an agent working with a buyer planning to use FHA financing who has a specific property picked out (even if it’s not under contract yet), we highly recommend contacting your lender to have them issue a casefile number before the new fee structure goes into effect.

Possibly related posts (automatically generated):

1. FHA changes mortgage insurance premiums
2. FHA postpones implementation of mortgage insurance changes
3. HUD Increases FHA Mortgage Insurance Premiums

As you know, FHA lending has become the lifeline for both the lending industry and the real estate industry. Without it, the activity that we have seen over the last 2 years would have been substantially reduced. With that increase in deal flow, FHA has taken on additional financial risk and exposure, and these new changes are an effort by FHA to reduce that excess risk.

FHA loans normally require two types of mortgage insurance for each loan: an “Up Front Mortgage Insurance Premium” (UFMIP) that is charged at the time the loan is taken out, as well as a monthly Mortgage Insurance Premium (MIP) that is added to the monthly mortgage payments. The UFMIP has historically been a fairly large fee, but one that the borrower could roll into their loan so that they would not have to increase their out-of-pocket expenses, with very little effect on their monthly payment; the MIP, on the other hand, was smaller in absolute terms but had more of an impact on the borrower’s monthly payments.

You may recall that on April 1, 2010, the UFMIP was raised from 1.75% of the borrowed amount to 2.25% of the borrowed amount. FHA’s new requirement will actually reduce the UFMIP to even less than it was previously–down to 1.00% of the borrower amount for most loans; that reduction will for most FHA borrowers reduce their monthly payment by about $6/mo for every $100,000 of their loan (assuming the most common current interest rates, of roughly 4.000%-4.500% for a typical FHA borrower).

However, FHA is at the same time imposing a significant increase in the monthly MIP, from an “MI factor” of 55 on most FHA loans to an MI factor of 90. The MI factor is a way of measuring the size of a monthly MIP; with each MI factor increase of 1 corresponding to an increase in the borrower’s monthly payment of roughly $0.83 per $100,000 of the loan. (Unlike w/ UFMIP, the MIP’s effect on monthly payment is independent of interest rates.) With the MIP nearly doubling because of this increase, the change to a borrower’s monthly payment because of the MIP increase will be about $29/mo per $100,000 of the loan.

The net result of these two changes is that borrowers will see their monthly payments go up by roughly $23/mo for every $100,000 of money borrowed; for a typical DC-area buyer taking out a $400k loan, that would result in an increase in monthly payments of nearly $100/mo. That’s not the end of the world, especially given current historically low interest rates, but it could still reduce the ability of some borrowers to qualify for loans and/or afford the properties that they intend to purchase.

These new changes should go into effect starting with all FHA loans w/ casefile numbers issued on or after September 7th, 2010. Casefile numbers are issued to a specific borrower for a specific property, but do not require having a ratified purchase contract. If you’re thinking of purchasing a specific property or refinancing an existing property using FHA financing but think that you may not be ready to act until after 9/7/10, you may want to talk to your lender to see if they can issue you a casefile number now so you can avoid paying the new UFMIP/MIP fees when they go into effect in September.

UPDATE: FHA has postponed implementation of these changes, so they will only go into effect for casefile numbers issued on or after October 4th, 2010.

Possibly related posts (automatically generated):

1. HUD Increases FHA Mortgage Insurance Premiums
2. Last Chance To Lock In Old FHA Fees
3. Buyer-Paid Private Mortgage Insurance (PMI) now deductible.

The new mortgagee letter sets out criteria that pretty much mirror the criteria that we discussed here earlier for conforming mortgages after a short sale–basically, the short seller must not have gone into default prior to the short sale (or else at least 3 years must have passed since the short sale was concluded), and must not have agreed to a deficiency judgment or other condition that indicates that the short sale was not payment in full for the old mortgage.

The mortgagee letter does clarify, however, that for FHA financing, underwriters will also be looking at the reason for the short sale; if it was for convenience or financial gain, then the short seller is not eligible for subsequent FHA financing. The specific example given in the mortgagee letter of a short sale that disqualifies the short seller from getting subsequent FHA financing is if that seller then purchased a “similar or superior property within reasonable commuting distance”.

Note that this rule as currently worded technically prohibits a “for gain/convenience” short seller or a short seller who agreed to a deficiency judgment from ever obtaining FHA financing afterwards; underwriters that I have spoken to say that they suspect that the rule will be interpreted to mean that those cases will simply be treated as “default” short sales and have a 3 year waiting period before they are eligible for FHA financing, but that is all very uncertain at the moment.

Are you considering a short sale or loan modification? Your future plans to buy another home some day could be affected by how you structure your loan renegotiations now, so it’s important to have your lawyer, agent, and/or future lender in on the discussions to make sure that decisions you make now don’t come back to bite you a few years down the road. Contact us and we’d be glad to set up an appointment to discuss your situation, and refer you to the correct combination of agent and/or lawyer to help you with your short sale or loan modification.

Possibly related posts (automatically generated):

1. How Long Do You Have To Wait After A Short Sale Before You Can Get A New Mortgage?
2. Lease/Purchase: An Alternative For Buyers Who Have Recently Done A Short Sale
3. Short Sale & Foreclosure Resources for Buyer Agents