Orange County, CA condo buyers using FHA financing just got an extra month added to the upcoming deadline of the end of the Spot Approval program. Back on June 12, 2009, FHA Mortgagee Letter 2009-19 was released, detailing new FHA Condo project approval guidelines, and setting a date for the end of the Spot Approval program along with elimination of nearly all condo project approvals in Orange County.
New Deadline for Spot Approval Program is December 7, 2009
Initially, the deadline was to be October 1, 2009. Then, with a push from the National Association of Realtors, FHA relented and decided to delay implementation of the new policy until November 3. Now, the deadline has been delayed again until December 7, 2009.
What Will Happen When, Or if This New Policy Goes Into Effect?
FHA financing for condo's will be very difficult, at least in the near term. Currently, FHA has a list of approved condo projects. FHA financing is available for properties within those approved projects. For those projects not approved, FHA has offered the Spot Approval program. The Spot Approval program is a relatively streamlined process for allowing financing on an individual unit within a non-approved condo complex. But FHA is not comfortable with the Spot Approval program. As a matter of fact, FHA really isn't very comfortable with their Approved Condo list. So, now, effective December 7, the list will be effectively scraped clean. Any project that has not been approved in the last 2 years will need to be re-certified. This means the lender will need to submit a package to HUD proving there are no material changes to the project that would keep it from being approved again. Since very few, if any projects in Orange County, have been approved in the past two years, a bottleneck is expected once the new process becomes effective.
Does the Delay Mean FHA is Going to Ease their Stance?
Maybe. In the FHA notification from this week, they announced they will provide better guidance on the new policy, including 1) they will offer additional leniency's to address the "difficult market" conditions, and 2) they will augment some portions of the Mortgagee Letter 2009-19, providing additional information and clarification. FHA also made it very clear that the Spot Approval program is extended through December 7. It actually sounds like FHA is realizing this is no time to make it any more difficult on first time home buyers than it already is.
FHA is Alive and Well in Orange County!
FHA financing currently makes up more than 25% of the closed transactions in Orange County. This is because of the flexibility FHA offers, especially in regards to low down payment and FICO scores as low as 620. With FHA loan limits in Orange County at $729,750, the program has proved to be popular not only with first time home buyers, but also move up buyers. There are not been a better time to purchase a home in Orange County in years.
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