April 17, 2021

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Mortgage News

FHA Revises Single-Unit Condo Approval Forms for Reverse Mortgages

The Federal Housing Administration (FHA) announced Monday that it has revised two of its forms that are relevant for condominium owners applying for FHA relief in the form of loan programs or certification: the Condominium Approval Questionnaire and the FHA Condominium Approval Questionnaire. This is evident from the publication of the Mortgagee Letter (ML) 2021-09, which was published on Monday morning.

Both forms are relevant to the Home Equity Conversion Mortgage (HECM) industry as each is required for any borrower looking to obtain an FHA-sponsored reverse mortgage on a condominium. Form HUD-9991 is required for anyone seeking a HECM loan for a one-unit condominium, while Form HUD-9992 is used to process FHA approval for condominium projects.

FHA requested public comment for the revision of these forms at the beginning of 2020 by announcing a publication in the federal register.

Single Unit Approval Questionnaire

The U.S. Department of Housing and Urban Development (HUD) Form HUD-9991 is used to process individual and loan level approvals for both forward mortgages and HECM loans. Using input obtained from the public as of late January 2021, the FHA has made a number of changes to the relevant document, which have taken the form of an information consolidation and the complete elimination of certain selected provisions.

Among the changes specific to Form 9991, a section requiring management company information has been removed. restructures a section on occupancy requirements by design; relocated sections related to hazard or flood insurance and requires additional insurance for approval of individual units.

The revision also removed a section that required documents for all residential units and certain additional documents for individual unit approval. However, a mortgage borrower will still be required to provide the required documentation as detailed in the Single Family Home Policy Manual 4000.1 (SFHP).

Condominium approval questionnaire

For condo project form 9992, the changes include consolidating sections related to a project eligibility worksheet and condominium project approval. Combine the Mortgage and Submitter information in Section 1 to allow more types of respondents to fill out and submit the form; Removed some selected questions from the project eligibility section; and restructuring of a section in relation to occupancy requirements by building type.

Data collection and eligibility determination in several sections have also been changed, including in the legal phase. lagging units, concentration of individual owners, occupancy requirements by type of building, financial stability and controls; Commercial / non-residential spaces; Litigation; Rent; Transfer of control; Insurance requirements; and legal restrictions on transportation stages.

Similar to a change on Form 9991, a section on Form 9992 that requires documents for a condominium association and for the form submitter has been removed, although a mortgage borrower will still need to submit the required documents as described in the 4000.1 SFHP manual.

How changes apply to both forms

According to the HUD, there are a few things to keep in mind as changes apply to both forms. First, the data collected on the questionnaire cannot now be collected more than 90 days before the questionnaire is signed. Second, instructions have been developed explaining exactly how questions should be answered and added to the references section of the 4000.1 SFHP manual.

It is also important that the requirement that the relevant owner association must fill out the forms and sign their certifications has been completely deleted. If the “submitter” on form 9992 is the association, he still has to fill out the certification according to the text of the ML.

Recent history

FHA released In August 2019, with effect from October 15 this year, a definitive guide to implementing guidelines and implementing guidelines was introduced, aimed at expanding FHA funding for qualified first-time buyers as well as seniors looking to grow older. The new regulation introduced an approval process for individual units, which makes it easier for individual condominiums to qualify for FHA-insured financing, and extends the recertification requirement for approved condominium projects from two to three years.

The rule was implemented in part in response to housing market demands and aims to provide reverse mortgages for seniors looking to age in a condominium unit, according to then-acting HUD Assistant Secretary and FHA Commissioner Brian D. Montgomery. The movements Received praise from the reverse mortgage industry.

Shortly afterwards, HUD released an ML Detailing specific procedures necessary to get a case number assignment for an individual approval before another ML is issued in the following month The original requirement has been updated for FHA condominium mortgages that apply to both the traditional forward mortgage and reverse mortgage programs at the same time. The letter provided additional clarification before the rule was implemented on October 15, 2019.

At the end of January 2020, HUD released “Project Approval for Single Family Condominiums,” a notice in the Federal Register asking for an opinion on data collection in connection with essential forms used to determine the eligibility of loans for borrowers living in condominiums. The changes outlined here are the result of the public comment period.

Read Mortgage letter 2021-09 on the HUD for information on the exact numbering of sections that have been changed on the appropriate forms.