Ugly Changes to FHA Condominium Loans

Once again from our friends at M Point Mortgage:

HUD Condominium Approvals Effective with Cases Assigned 10/1/09

Loans with case numbers ordered on or after October 1, 2009, are subject to the new condominium procedures outlined by HUD in Mortgagee Letter 2009-19.


1. Spot Loan Condo Approvals are no longer allowed.

2. Any condominium that has not been approved by HUD 10/1/09 or later will require full condominium review and approval by HUD. Only exceptions: FHA to FHA streamline refinances or sale of a HUD REO by HUD’s Real Estate Owned Division. Even on approved projects lender will be required to certify that we have 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.

3. Maximum FHA Concentration – HUD is limiting the number of FHA insured loans to 30% for any project. This is a very big change. Per HUD recent HUD conference call, the plan is for FHA Connection to be capable of monitoring. It is imperative that case numbers be ordered correctly with the correct project approval code. If the project is not at maximum concentration a case number will be assigned; if the project is at maximum concentration and not eligible for another FHA loan the case number will not be assigned and a message issued stating that. As loans are paid off within the project Connection will be updated by HUD “freeing up” units for new case assignments.

Changes to settlement procedures you need to know!

Beginning 8/1/2009 the Federal Mortgage Disclosure Improvement Act (MDIA) goes into effect and applies to all mortgage loan applications dated 8/1/2009 and beyond.

Basically, purchase borrowers will now have the same protection as refinance borrowers creating a 3 day period to understand exactly what is expected at settlement regarding closing costs.

Changes from the initial Good Faith Estimate of Settlement Costs to the final HUD 1 regarding the following items must be redisclosed no less than 3 days prior to settlement:

* Origination and discount points

* Appraisal and reinspection fees

* Credit report fees

* Flood Certification fees

* Tax service fees

* Commitment fees

* Processing fees

* Underwriting fees

* Transfer and Recordation fees

* Realtor Admin. Fees


The Federal Government is making sure borrowers cannot get "jammed at settlement" with new fees and forced to close. Borrowers now have 3 days to understand any fee changes before settlement. This is a good move since it levels the playing field and gets rid of unethical practices by unscrupulous lenders.


It is very important you work with your lenders and supply them with all the information regarding any and all Admin fees that will be charged at settlement so no one gets left short at the table.

This information was provided by my friends at MPOINT Mortgage:

Adrian Cox

Erika Zabell

Thank you!