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A new approval process established by the FHA gives reverse mortgage lenders the authority to determine eligibility of condominium projects and their insurance mortgages. Revere Mortgage lenders may review documentation of projects and become certified to comply with HUD’s regulations, maintain updated legal documentation regarding the condominium project, and provide HUD with the same materials so that they may maintain the same documentation.
The new process allows two options for project approval including the HUD Review and Approval Process (HRAP), and the Direct Endorsement Lender Review and Approval Process (DELRAP). The latter is only available to reverse mortgage lenders with Direct Endorsement authority and adequate knowledge and expertise to review and approve condominium projects. Both processes are applicable to condo developments that are proposed or under construction, existing construction or conversion.
There are requirements that all approvals must follow regarding the designs and policies of the projects themselves. The projects should consist of two units or more. They must be covered by hazard and liability insurance and, when applicable, flood insurance.
The property’s total floor area in a project cannot exceed 25 percent usage for commercial purposes and the commercial portion of the project must be of a nature that is homogenous with residential use and free of adverse conditions to the occupants of the individual condominium units. One investor cannot own more than 10 percent of the units, including developers/builders that subsequently rent vacant and unsold units. For two and three unit condominium projects, no single entity may own more than one unit within the project; all units, common elements, and facilities within the project must be 100 percent complete; and only one unit can be conveyed to non-owner occupants.
The number of units that are 30 days past due of their condominium association fee payment cannot exceed 15 percent and at least 50 percent of the total units must be sold prior to endorsement of any mortgage on a unit. Valid presales include an executed sales agreement and evidence that a reverse mortgage lender is willing to make the loan. At least 50 percent of the units of a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction or projects still in their initial marketing phase, FHA will allow a minimum owner occupancy amount equal to 50 percent of the number of presold units.
If the condominium has been created and exists in full compliance with applicable State laws in the given jurisdiction, and with all other applicable laws and regulations it is eligible. Requirements for approval include site condominiums, meaning single family detached dwellings that exist under a declaration of condominium covenants or condominium form of ownership. Manufactured housing condominium projects may not be processed as site condominiums and will require approval under HRAP.
If you would like an information packet or would like to set up an appointment with one of our Reverse Mortgage Specialists, please call (866) 683-3690 or complete our online Reverse Mortgage Information
Tags: condo reverse mortgages fha, condo reverse mortgages HUD, house reverse mortgage, reverse mortgage condo approval process
