NEW FHA CONDOMINIUM 
MATRIX/GUIDELINES   
 
 
  
 
 

Change to Insurance Requirements………………………………………………….. Page 2

Change to Maximum FHA Concentration………………………………………….. Page 3

Ineligible Condominium Projects…………………………………………………… Page 4

Established Condominium Projects……………………………………………………Page 5, 6

New Condominium Projects ………………………………………………………… Page 7, 8

Condominium Conversions …………………………………………………………… Page 9

Condo Projects Approved by HRAP or another lender thru DELRAP………………..Page 10

Elimination of Spot Approvals ………………………………………………………...Page 10

Transition Strategy………………………………………………………………………Page 11

 
 
 New FHA Condominium Guidelines
Effective with FHA Case Numbers Assigned ON OR AFTER December 7, 2009, Except Where Noted

CHANGE TO INSURANCE REQUIREMENTS

• Master Hazard Insurance must be 100% replacement coverage. Co-insurance is not allowed. Gap
insurance is not allowed.

• General Liability insurance with minimum coverage of $1M is required.

• Fidelity Insurance is required for all Condominium projects with 20 or more units. Coverage must meet
or exceed the sum of 3 months aggregate assessments on all units plus ALL reserves funds.

• Flood insurance is required when a project is in a flood zone. Coverage must meet or exceed the greater
of 100% replacement cost or the maximum allowable coverage as provided by the National Flood
Insurance Program.

• HO-6 (interior unit coverage) policy is required in the event a master hazard policy is bare walls which
mean that the master policy does not cover floors, drywall, fixtures, and cabinetry. If a master policy
(typically condo projects do not provide HO-6 coverage) includes the interior but does not include betterments
and improvements, a HO-6 policy will be required. Coverage must meet or exceed 20% of the appraised
value.

Page 2 Revised 12/09 Ver. 2 
 
 CHANGE TO MAXIMUM FHA CONCENTRATION IN A CONDOMINIUM PROJECT

• Concentration level in new condominium projects may not exceed 50% of the total number of units
within projects greater than 4 or more units. (case numbers 12/7/09 to 12/31/10)

• Projects with 3 or fewer units may have no more than 1 unit encumbered with FHA insurance.

• Maximum allowable concentration for established projects may reach 100% if ALL of the following
applies (case numbers 12/7/09 to 12/31/10):

• Must not be an ineligible project (see page 4),

• Project must be complete for a minimum of one year as evidenced by the certificate of
occupancy,

• 100% sold,

• HOA must be turned over,

• Budget must reflect 10% line item allocation to reserves (see ML 09-46B, pg 5 #11) AND

• 50% of units must be owner occupied (2nd homes & investment property transactions are not to
be included in the owner occupancy calculation)

• FHA will display the concentration information in each approved condominium project in both FHA
Connection and the HUD project approval website which may be found at the following link:
https://entp.hud.gov/idapp/html/condlook.cfm

• A new case number will not be assigned if the project meets or exceeds maximum exposure. A small
tolerance will be allowed by the system in order to accommodate some fall-out.

Page 3 Revised 12/09 Ver. 2 
 
 INELIGIBLE CONDOMINIUM PROJECTS (Proposed, Under Construction, New, Existing)

• Condominium Hotels (aka “Condotels”)

• Manufactured housing projects considered condominiums. GRI does NOT finance loans for
manufactured homes.

• Timeshares or segmented ownership projects.

• Houseboats.

• Multi-Dwelling Units (multiple dwellings secured by one security instrument).

• Projects that one entity owns greater then 10% of all units.

• Projects with commercial space in excess of 25% or projects that are not deemed primarily residential.

• Projects with delinquent HOA Dues (more than 15% of total units are more than 30 days past due)

• Projects subject to current or pending litigation.

• Projects with special assessments.

• Projects not deemed to be used primarily as residential.

• Projects located in the state of Florida. (Condo projects in FL must be sent directly to HUD for
approval)

• 2-4 unit condo projects without an arbitration agreement

Page 4 Revised 12/09 Ver. 2 
 
 ESTABLISHED PROJECTS (HOA turned over)

• A minimum of 50% of units must be owner occupied (Second homes and non owner occupied
transactions are not included in the occupancy calculation)

• Must meet FHA Concentration Requirements

• Budget must reflect a 10% line item allocation to a reserve account. (See ML 09-46B, pg 5 #11 for
ALL requirements)

• Environmental report will only be required at HUD’s discretion (HRAP) or the Direct Endorsement
client’s (DELRAP), in response to any potentially adverse remarks on the appraisal or on documentation
provided by the builder/developer,

• Approval cannot be issued by Guaranteed Rate without recorded condominium declarations and
bylaws. Unrecorded documents will not be permitted for project review of an established project under
the HRAP or DELRAP Approval Process.

• Right of First Refusal may be allowed unless it violates discriminatory conduct under the Fair Housing
Act regulation at 24 CFR Part 100.

Page 5 Revised 12/09 Ver. 2 
 
 REQUIRED DOCUMENTS FOR CONDO REVIEW:

ESTABLISHED CONDOMINIUM PROJECTS

1. All Condominium Legal Documents

a. Recorded Plat Map indicating Legal Description
b. Recorded Declarations and any Amendments and
(Covenants, Conditions and Restrictions if applicable)
c. Signed and Adopted Bylaws
d. Articles of Incorporation filed with the State
e. Recorded Condominium Site Plans
2. Plan or Evidence of Transfer of Control
3. Proposed or Actual Budget
4. Management Agreement, if applicable
5. FEMA Flood Map
6. GRI FHA FULL Condo Questionnaire
7. Appraisal (Individual Unit)
8. Most recent 12 months(if applicable) of minutes from HOA Board meetings
9. Certificate of Insurance

Page 6 Revised 12/09 Ver. 2 
 
 NEW CONDOMINIUM PROJECTS (Proposed, New, Under Construction)

In addition to the general eligibility changes and the changes shown in the Established Condominium
guidelines, the following guideline changes are effective for NEW Condominium projects:

• A minimum of 30% of units must be conveyed or under contract to owner occupied purchasers

Builder MUST certify to this requirement by providing a detailed listing of units sold, under
contract or showing occupancy of each unit accompanied by the executed Developer/Builder
Presales Certification form (Attachment F)

AND

• Executed Developer/Builder Certification to Condominium Requirements form (Attachment E).

• Builders Certification of Plans, Specs and Site, Form HUD 92541(see attached)

• Environmental report will only be required under DELRAP if:

At HUD’s or the Direct Endorsement client’s discretion in response to any potentially adverse
remarks on the appraisal or on documentation provided by the builder/developer.

• In cases where a project has received a building permit and a certificate of occupancy neither an Early
Start Letter NOR a HUD approved 10 year warranty plan is required.

• In cases where a project does NOT have a building permit and a certificate of occupancy OR where the
jurisdiction does not issue such documents an Early Start Letter or a HUD approved 10 year warranty
plan is required.

• Temporary Certificate of Occupancy will be acceptable provided that:

1. All common areas and amenities are complete

2. The temporary/conditional Certificate of Occupancy that was issued clearly indicates that the
unit is habitable and eligible for immediate occupancy.
3. The issuing jurisdiction has a standard protocol whereby permanent certificates are issued
and maintained.

• Unrecorded condominium declarations and bylaws are permitted for the initial project review provided
that a valid state approval letter is provided. Final Approval will NOT be issued until a copy of the
recorded declarations and bylaws are received, reviewed and been deemed acceptable.

• Transfer of Control of the Homeowner’s Association must occur no later than the latest of the
following:

• 120 days after the date that 75% of units have been conveyed, OR

• 3 years after completion of the project as evidenced by the first conveyance to an owner, OR

• As local or state laws require (if applicable).

• Right of First Refusal may be allowed unless it violates discriminatory conduct under the Fair Housing
Act regulation at 24 CFR Part 100.
Page 7 Revised 12/09 Ver. 2 
 
 REQUIRED DOCUMENTS FOR CONDO REVIEW:

NEW (Proposed/New Construction) CONDOMINIUM PROJECTS

1. All Condominium Legal Documents

a. Initial (Recorded copy required before final approval is given) Plat Map indicating Legal Description

b. Initial (Recorded copy required before final approval is given) Declarations

(Covenants, Conditions and Restrictions if applicable)
c. Signed and Adopted Bylaws
d. Articles of Incorporation filed with the State
e. Initial (Recorded copy required before final approval is given) Condominium Site Plans
2. Proposed Plan or Evidence of Transfer of Control
3. Proposed or Actual Budget
4. Management Agreement, if applicable
5. Equal Employment Opportunity Certificate (Form HUD 92010) (see attached)
6. Builders Certification of Plans, Specifications and Site, form HUD-92541(see attached)
7. FEMA Flood Map
8. Estimated Construction Completion Date
9. Attorney’s Opinion Letter
10. GRI FHA FULL Condo Questionnaire
11. Appraisal (once appraisal is completed)
12. Developer/Builder’s List Documenting ALL units sold, under contract or closed
a. Developer/Builder Pre-Sales Certification-Attachment F on company (developer/builder)
letterhead.
13. Developer/Builder Certification to Condominium Requirements –Attachment E on company
(developer/builder) letterhead.
14. Certificate of Insurance
15. Building Permit and Certificate of Occupancy from local jurisdiction

Page 8 Revised 12/09 Ver. 2 
 
 CONDOMINIUM CONVERSIONS (HOA NOT turned over)

In addition to the general eligibility changes and the changes shown in both Established and New Condo
guidelines, the following guidelines are effective for condo conversion:

• The one-year waiting period requirement for conversions is eliminated;

• In the event that FHA is insuring a mortgage on a unit and an undivided interest in the common
elements on a project undergoing remodeling or rehabilitation, the entire condominium project, including
the common facilities, must be 100 percent completely built before any mortgage may be endorsed.

• Conversions of properties from non-residential or from rental, whether tenant- occupied or vacant, will
be treated as new construction, see below for required documents.

Note: Engineering report may be required at HUD’s or the Direct Endorsement client’s discretion.

REQUIRED DOCUMENTS FOR CONDO REVIEW:

CONVERSION CONDOMINIUM PROJECTS

2. All Condominium Legal Documents

a. Initial (Recorded copy required before final approval is given) Plat Map indicating Legal Description
b. Initial (Recorded copy required before final approval is given) Declarations
(Covenants, Conditions and Restrictions if applicable)
c. Signed and Adopted Bylaws
d. Articles of Incorporation filed with the State
e. Initial (Recorded copy required before final approval is given) Condominium Site Plans
3. Plan or Evidence of Transfer of Control
4. Proposed or Actual Budget
5. Management Agreement, if applicable
6. Builder’s Certification of Plans, Specifications and Site, form HUD – 92541
7. FEMA Flood Map
8. Estimated Construction Completion Date
9. Attorney’s Opinion Letter
10. GRI FHA FULL Condo Questionnaire
11. Appraisal Individual Unit(once appraisal is completed)
12. Developer/Builder’s List Documenting ALL units sold, under contract or closed
a. Developer/Builder Pre-Sales Certification-Attachment F on company (developer/builder)
letterhead.
b. Developer/Builder Certification to Condominium Requirements –Attachment E on
company (developer/builder) letterhead.
13. Certificate of Insurance

Page 9 Revised 12/09 Ver. 2 
 
  

Condo Projects Approved by HRAP or another lender thru DELRAP

Second and subsequent lenders that submit a unit for insurance in a project that is listed on the FHA-
approved condominium list are not required to complete any further approval process. However, as part
of loan-level review, FHA will require Guaranteed Rate to certify it has 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. FHA will also require Guaranteed Rate to certify that it has reviewed and
verified the condominium project’s continued compliance with the following:

• Percentage of Single investor ownership,

• Percentage of owners in arrears for condominium association fees,

• Owner-occupancy rate AND

• FHA loan concentration rate

REQUIRED DOCUMENTS FOR CONDO REVIEW:

Condo Projects Approved by HRAP or another lender thru DELRAP

1. Copy of FHA Approval from HUD project approval website (must be dated after 12/7/2009)
2. GRI FHA Approved/Limited Condo Questionnaire
3. FHA Concentration-FHA will display the concentration information in each approved condominium
project in both FHA Connection and the HUD project approval website which may be found at the
following link: https://entp.hud.gov/idapp/html/condlook.cfm
4. Appraisal
5. 12 Months of Minutes from HOA Board Meetings

The documents (1-5) above must be uploaded to paperless and email must be sent to
FHACondoProjectReview@guaranteedrate.com to begin the review process.

ELIMINATION OF FHA SPOT APPROVAL PROCESS

Effective for all new FHA Case Numbers assigned on or after February 1, 2010, Spot Approval Process
will be eliminated. Current SPOT APPROVAL guidelines and requirements per ML 1996-41 must be
met.

GUARANTEED RATE RESERVES THE RIGHT TO REQUEST ADDITIONAL DOCUMENTATION AT ANY 
TIME DURING THE REVIEW PROCESSS 

Page 10 Revised 12/09 Ver. 2 
 
  

Transition Strategy per ML 09-46B page 14

FHA will move all currently approved condominium projects to the new approval list and FHA
connection database. The following requirements are applicable based on the date of the initial project
approval. Additional guidance on new data entry requirements will be issues in a separate ML.

• Projects that received approval prior to October 1, 2008 will require re-certification on or
before December 7th, 2010.
• Projects that received approval between October 1st, 2008 through December 7th, 2009 will
follow the re-certification requirements defined in the Project Approval Section, XII from
ML 09-46B.

Condo Projects currently approved on FHA’s database/website prior to December 7th, 2009
will require the following documents to be reviewed and warranted.

REQUIRED DOCUMENTS FOR CONDO REVIEW:

Condo Projects Approved on FHA’s website thru December 7th, 2009

1. Copy of FHA Approval from HUD project approval website (must be dated before 12/7/2009)
2. GRI FHA Approved/Limited Condo Questionnaire
3. Appraisal
4. Certificate of Insurance

The documents (1-4) above must be uploaded to paperless and email must be sent to
FHACondoProjectReview@guaranteedrate.com to begin the review process.

GUARANTEED RATE RESERVES THE RIGHT TO REQUEST ADDITIONAL DOCUMENTATION AT ANY TIME 
DURING THE REVIEW PROCESSS 

Page 11 Revised 12/09 Ver. 2 
 
 Page 12 Revised 12/09 Ver. 2