In today's economic climate, condominium purchasers are increasingly looking for Federal Housing Administration (FHA) backed financing to purchase condominium units with lower down payments than conventional financing. In turn, to maximize the availability of financing for potential purchasers, condominium sellers and condominium associations are frequently inquiring about how to certify their condominium association building as FHA approved (due to the elimination of FHA spot approvals for condominium units on February 1, 2010).
Levenfeld Pearlstein, LLC ("LP Legal") is proud to partner with Wells Fargo Home Mortgage to provide its clients a program to obtain efficiently FHA certification for new and existing condominium associations. FHA certifications are only valid for two years and require recertification every two years thereafter.
Given that a majority of all first time residential home purchases and one third of all first mortgages are FHA loans, and that FHA loans are quickly becoming the majority of all loans for residential real estate purchases, the primary benefit of FHA certification to a condominium association is that financing for unit purchases in those associations will be available to a significantly higher number of potential purchasers. Therefore, the property value of units in buildings that are FHA approved will not be adversely affected due to the unavailability of purchaser financing. Currently for the Chicago area, FHA loans are up to a maximum of $410,000 (amount is revised yearly).
There are two primary methods to obtain FHA certification for an association. The first, and preferred method, is for the association and their legal counsel to work with a FHA approved lender to process the association's FHA application, commonly referred to as the DELRAP method (Direct Endorsement Lender Review and Approval Process). The second method is for the association and its legal counsel to directly submit the FHA application to the Federal Department of Housing and Urban Development (HUD), commonly referred to as the HRAP method (HUD Review and Approval Process).
The DELRAP process is much quicker, and ultimately less expensive, for the association because (i) the approved lender has developed operational efficiencies in the process and has an extensive working relationship with HUD for FHA certifications and (ii) the lender is performing some of the 'leg work' that association counsel would otherwise be performing at an hourly rate in submitting the FHA application under the HRAP process. DELRAP approvals can be up to six to eight weeks quicker in obtaining FHA approvals than HRAP approvals. As such, LP Legal has partnered with Wells Fargo Home Mortgage, the most experienced lender in the DELRAP program and the largest in terms of obtaining FHA approvals.
LP Legal will work with association property managers to make sure the association meets project eligibility requirements for FHA approval and the association condominium declaration meets HUD requirements at the outset of the process. If the condominium declaration does not meet HUD requirements, LP Legal will draft the necessary condominium declaration amendment. The estimated cost to obtain FHA approval varies depending on the initial status of the association in meeting project eligibility requirements, and whether a condominium declaration amendment is required to be drafted and unit owner approved. After an initial review of the association's condominium declaration and association's status with respect to project eligibility, a specific estimate of legal fees and costs will be given to an association for their particular circumstances.
Please call Mark D. Pearlstein (312.476.7520), Howard S. Dakoff (312.476.7556) or Patricia A. O'Connor (312.476.7523) to inquire further into the FHA approval process, and estimated costs, for your association to obtain FHA approval. We welcome the opportunity to serve your community.
