On August 15, 2019, FHA published its Condominium Project Approval Final Rule in the Federal Register (Docket No. FR-5715-F-02). Additionally, it added two new sectionsāSection II.A.8.p "Condominiums" and Section II.C "Condominium Project Approval"āand incorporated new condominium project approval policy guidance in other sections of its Single Family Housing Policy Handbook 4000.1 (SF Handbook). The effective date for both the Final Rule and SF Handbook updates is October 15, 2019.
Section 203 (b) of the National Housing Act provides authority to insure any mortgage covering a one-family unit in a project coupled with an undivided interest in the common areas and facilities which serve the project. FHA insures condominium loans for up to 30-year terms to purchase or refinance a unit in an FHA-approved condominium project or in a project that is not FHA-approved but meets the Single-Unit Approval requirements
For project approval or recertification, eligible projects must be complete and exist in full compliance with applicable state law requirements including good standing with the state, and with all other applicable laws and regulations. The condominium project also must meet the approval requirements established by HUD through the SF Handbook 4000.1, including insurance coverage, financial condition, nature of title, the existence of any pending legal action or physical property condition, and other factors that may affect the viability or marketability of the project or its units.
To be eligible for Single-Unit Approval, the unit must be located in a project that is not FHA-approved, that is complete and ready for occupancy, has at least five dwelling units and it is not a manufactured home. The project must also meet a subset of the requirements set forth for project approval, including FHA insurance concentration, owner-occupancy percentage, and financial condition of the project.