condoEffective November 1, 2009 HUD has changed the rules with respect to condo eligibility for the Home Equity Conversion Mortgage (HECM) program – the most popular reverse mortgage product for seniors.   After that date only FHA approved condominuims will qualify.  No more “spot” approvals are permitted on projects that do not already have FHA approval.

Spot Removal

Previously, the “spot” approval process allowed underwriters to approve individual units rather than an entire complex.  Approving an entire complex is a cost prohibitive process these days… and unlikely to be undertaken by any condo association.  The expense is burdensome.  Many associations actually have no reserves at all and, therefore, could not qualify even if they wanted to.

After November 1st, seniors who own condos in non-FHA approved buildings will no longer be able to qualify for the HECM.  In fact, no FHA loan will be available on these non-approved units and values will probably fall as a result.  Ask your loan officer if your condo project is on the FHA approved list.  If it’s not, you won’t be able to do a HECM… HUD’s most popular reverse mortgage program… after November 1st.  You need to act right now to get the loan approved before the deadline.

If you plan to buy a condo, whether as a vacation home or as a new primary residence, you want to know if the project is FHA approved.  Lack of FHA certification could impact future value and sales price of your new unit.

Given HUD’s recent announcement that Principal Limits will be reduced effective October 1st and this elimination of the spot approval process, it should be obvious that the HECM program is being tightened up. Some believe it is being strangled…

UPDATE: HUD has announced that implementation of the new rules regarding spot approval has been delayed to December 7, 2009

UPDATE UPDATE: HUD changed the implementation date again – to February 1, 2010

Author – Robert H. Irving, CSA®
Senior Reverse Mortgage Consultant

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