A series of rule revisions by the Federal Housing Administration has caused thousands of common-interest developments to become ineligible for FHA mortgages. This has shut off FHA loan money for would-be buyers, forcing them to pursue conventional bank loans which sometimes require 20% down payments or higher versus the FHA’s 3.5% minimum. Basically, in order to qualify for FHA financing the project must be on the HUD approved list. You can check to see if a project is on the approved list by clicking here to access the HUD database. Project approval is sometimes difficult to obtain and many Homeowner’s Associations are reluctant to seek approval as the application requirement may expose the existing board members to personal criminal liability.
Board members can find themselves in legal jeopardy by the requirement that the board member sign certifications attesting that the governing documents comply with all local statutes and that they have no knowledge of situations that could cause any owner to become delinquent in the association dues at some later date. The mandatory certification carries a maximum penalty of $1 million in fines and 30 years’ imprisonment if found to be incorrect.
Out of approximately 25,000 common-interest developments nationwide with expiration dates for FHA eligibility between last December and Sept. 30 of this year, only 2,100 — just 8.4% — have been approved or recertified by the agency, according to Lemar Wooley, an agency spokesman. With this low approval rate, if you are a FHA Buyer looking at the approved list will help you in your property search.
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