I've heard that FHA spot approvals on units not already approved no longer exist. Is this accurate?

Asked by Kristina, 60661 Mon Mar 1, 2010

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, ,
Tue Mar 2, 2010
Hi Kristina,

Yes, that is correct (as of February 1st).

Non-FHA approved condo buildings are now eligible for FHA approval through DELRAP (Direct Endorsement Lender Review and Approval Process). As a Full Eagle lender, we (Wintrust Mortgage) have the authority to use HUD’s DELRAP process to approve condo projects in-house (3 to 5 day turn around time).

Please contact me at 773.456.9662 or aluett@luettmortgagegroup.com for more information.

Kind regards,
Andrew
2 votes
, ,
Mon Mar 1, 2010
Good answers here from the others and good links too.

The only thing I'd add is that you might want to know that I called the Denver Home Ownership Center (HUD) to see how long they're taking on approvals and they said they're out 8 weeks. DELRAP (lender approval) is faster but not by a ton. I called a friend of mine that does assocation approvals for Wells Fargo and they're at 4-6 weeks. Also, they were charging 750 bucks but I guess they lowered it to 350.

Sorry for the bad news.
1 vote
Michael Vrie…, Agent, Chicago, IL
Fri Mar 9, 2012
Correct. I've worked closely with Neena Vlamis and A&N mortgage to get buildings fully approved. Her team does a phenomenal job.
Web Reference:  http://www.neenav.com/
0 votes
David, Home Seller, Bethesda, MD
Fri Jan 7, 2011
Our condo project received FHA approval on January 6th, 191 days after first applying for the waiver of the investor concentartion regulation and 21 days after applying for FHA approval to the Philadelphia HOC via the HRAP process.
0 votes
David, Home Seller, Bethesda, MD
Fri Dec 17, 2010
Yes, we have two non-profit entities that own 3 units each in our project (we have a total of 17 units). Each of the non-profit groups rent their units to homeless and underpriviledged families using HUD programs. The non-profits are original owners (since 1988) and have never missed any payments. As a result of their presence and mission we were granted a waiver on the investor concentration regulation. Excluding the non-profits from the owner occupancy calculation also enabled us to exceed 50% on that count.
I did not actually submit the HRAP application. I simply mailed the application that was assembled by our condo board and signed by the condominium association president.
0 votes
Steve Stenger, , Chicago, IL
Wed Dec 15, 2010
Hi David,

Did you obtain a waiver because you have non-profit units or affordable housing in your association? I am surprised that they have allowed you to submit since their updated procedures indicate that they don't want packages submitted by realtors, buyers or sellers. I am not surprised by the length of time it took to obtain a waiver.

Steve Stenger
0 votes
David, Home Seller, Bethesda, MD
Tue Dec 14, 2010
Steve,
We were granted a waiver on Nov. 30th. HUD admitted losing some of the materials in our application. They also claimed to have 20 other waiver requests to deal with. It took 154 days to get the waiver. I have now submitted an FHA approval application using the HRAP process. I'm told by the Philadelphia HOC HRAP will take 30 days.
0 votes
Steve Stenger, , Chicago, IL
Sun Nov 28, 2010
Hi David,

HUD is taking so long because it has gone to Washington (Headquarters) for sign off. They aren't swamped with waiver requests since they really don't allow them. Its because its in Washington and they tend to drag things on way longer than necessary.

Steve Stenger
President
Condo Approval Professionals LLC
(847)293-2962
E-mail: steve@condo-approval.com
0 votes
David, Home Seller, Bethesda, MD
Fri Nov 26, 2010
Just thought I'd give an update on our pending FHA approval (I posted my story on Aug. 23rd).
We have yet to be officially approved. According to HUD officials with whom I've spoken, we were granted a waiver on the 10% investor concentration regulation which will in turn positively affect our owner occupancy rate (they eliminate the non-profits from that calculation). We now await the commissioner's signature and a standard approval from Philadelphia HOC on the remaining regulations.
Perhaps it's because we needed the waiver but the approval process for our project has now gone on for exactly 150 days and it's still not complete. HUD claims it's because they've been swamped with waiver requests.
0 votes
David, Home Seller, Bethesda, MD
Mon Aug 23, 2010
Our condo complex did an HRAP application. Sent it to the Philadelphia HOC on June 30. It was approved at that level and sent on to DC July 21 for final full approval which has yet to come. We are still awaiting final FHA approval (54 days and counting).
With that said our case is a complicated one - two non-profit entities own more than 10% in our buliding. One entity aprovides housing opportunities via HUD low income housing programs, the other, a faith based non-profit, also provides low income and homeless families temporary housing. Inclusion of the two non-entites skews the owner-occupancy number but minus the entities we meet that standard as well as other regulations outlined in the mortgagee letters.
0 votes
David Nimick, Agent, Chicago, IL
Wed Mar 3, 2010
Indeed, all FHA deals not given a specific file number before February of this year must now have the entire building FHA approved. The process is a hassle, but not one that would take months and months to solve. To be honest, in my experience looking at condos with my buyer clients thus far this year, most buildings with more than a few units are either already working on getting their building approved or are planning on discussing it at their next board meeting.

Hope that helps!

Dave
0 votes
Philip Sencer, Agent, Chicago, IL
Tue Mar 2, 2010
Yes, but the DELRAP process is not hideously complicated and I work with a lender that does them so if the building fills out a questionaire and the answers appear to be in compliance, the rest of the process is not particularly complicated, but does take some time. However, if you are looking in 60661, it may be a bit more difficult. Let me know if you want more details.

philip
0 votes
Steve Stenger, , Chicago, IL
Tue Mar 2, 2010
Yes, now the whole building needs FHA approval. My company, Condo Approval Professionals LLC, specializes in this area. We have over 16 years of national condo project approval experience. I can help you get your condo approved. I process them faster than Wells since my company does the approvals and doesn't have to ship it out to California to the national office where everyone at Wells has to send their projects. That is why it takes so long. I have had several condos approved by HUD (HRAP) in less than 30 days.

Steve Stenger
President
Condo Approval Professionals LLC

(847)293-2962
0 votes
, ,
Mon Mar 1, 2010
Well, . . . . I got a 2 million dollar policy and one foot in Canada (up here in MN). Maybe I should quit complaining and do these DELRAP approvals myself, eh? LOL! :)
0 votes
, ,
Mon Mar 1, 2010
Charles,

I think the reason many lenders do not want to do DELRAP approvals are because the verification of such items fall on HUD, not the lender on HUD approved projects. Yes, a falsified warranty submission to HUD can have a similar liability but I think most lenders would like to move most liability away from their plate. The "30 years in jail and or $1 million dollar" liability is enough to scare any underwriter.

Yes, I wish more lenders wouldn't practice such "scared" tactics, but there was a day when the attitude towards lending was the exact opposite and not too long ago. The correct attitude lies somewhere in the middle but we happen to be in the tightening stage.
0 votes
, ,
Mon Mar 1, 2010
Thanks Keane (nice brochure by the way).

I think Wells is this far back because they're the only lender that buys our funded loans that's approving associations using the DELRAP method. I can appreciate any lender's fear about liability but I think the whole industy is overreacting to this. The guidelines are clear about what is and isn't eligible. If it's a good association they should approve it. It's as though they didn't read the part at the bottom of the mortgagee letter where it reads (regarding condo loans being submitted for insurance after the association has already been approved):

"as part of loan-level review, FHA will require the lender to certify it has no knowledge of circumstances or conditions that might have an adverse effect on the project or cause a mortgage secured by a unit in the project to become delinquent. FHA will also require the lender to certify that it has reviewed and verified the condominium project’s continued compliance with the initial approval requirements regarding investor ownership, percentage of owners in arrears for condominium association fees, owner-occupancy rate and FHA loan concentration rate, and the lender certifies that the condominium project continues to comply with FHA requirements."

So maybe I'm stupid or something but what's the difference in the liability of doing the delrap approval and insuring a loan vs. insuring one after it's already been approved? You have to certify it meets guidelines either way and you're on the hook either way. This industry is so full of fear that I think they are reacting to changes like this irrationally.

Kristina, sorry for getting nerdy like this in your question post but this is what FHA condo buyers are caught up in right now and it's all very sad.
Web Reference:  http://www.charlesdailey.com
0 votes
, ,
Mon Mar 1, 2010
Charley,

Great points. The same applies for the HUD office in California. They're about 60 days out.

I'm surprised to see any lenders directly approve any projects through DELRAP. The liability is gigantic. I can understand why Wells takes that long.
0 votes
, ,
Mon Mar 1, 2010
Kristina,

That is correct. The Department of Housing and Urban Development (HUD- The governing body for FHA loans) first announced this last summer. They extended the spot check deadline 3 times before finally settling on February 1st this year. In response to a large response, HUD released temporary guidelines to make it easier for condo projects to acquire their warranty. This lenient guide began on December 7th, 2009 and expires at the end of this year. Afterwards, a permanent, more difficult set of guidelines to get a condo project approved will go into effect.

Please see my two blog posts related to this topic written on Zillow's "Mortgages Unzipped" blog. I covered the initial announcement regarding spot checks and second post regarding the last extension of spot checks and the new guidelines.

http://www.zillow.com/blog/mortgage/2009/07/21/new-fha-guide…

http://www.zillow.com/blog/mortgage/2009/12/24/new-fha-guide…
0 votes
Lucid Realty…, Agent, Addison, IL
Mon Mar 1, 2010
Kristina,

As Matt stated spot approval is gone. Check out the link to the blog post below that spells out the new options for approving those buildings.

http://blog.lucidrealty.com/2010/02/12/the-good-and-bad-of-r…

Sari
http://LucidRealty.com
Web Reference:  http://LucidRealty.com
0 votes
Matt Laricy, Agent, Chicago, IL
Mon Mar 1, 2010
Kristina,
They now have to approve the whole building. The spot approval is gone.

Matt Laricy
Americorp Real Estate
Brokers Associate, e-PRO
mlaricy@americorpre.com
708-250-2696
0 votes
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