MORTGAGE LOAN COMPLIANCE®

The Federal Housing Administration has issued new condominium lending policies that go into effect Dec. 7. But the agency is making several temporary exceptions to the new rules due to the "volatility" in the condo market.

The new FHA lending policies spelled out in Mortgagee Letter 2009-46 B limit the number of condo units in one complex that can be financed with FHA-insured loans at 30%. And 50% of the units must be owner-occupied before FHA financing can be used.

However, Mortgagee Letter 2009-46 A allows exceptions to the FHA concentration and owner-occupancy requirements until Dec. 31, 2010. One exception allows FHA lenders to ignore foreclosed units in calculating the owner-occupancy rate until the end of next year.

The Department of Housing and Urban Development will allow FHA lenders to use a "Spot Loan Approval Process" for condominium units until Feb. 1, 2010.

Spot approvals allow FHA lenders to finance one condominium unit in a building that has not been approved by HUD. The new condo lending policies gives FHA direct endorsement lenders the authority to approve condominium projects for the first time ever.

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