Mortgage Insurance for Construction or Substantial Rehabilitation of Condominium Projects

To enable sponsors to develop condominium projects in which individual units will be sold to home buyers.



Agency - Department of Housing and Urban Development

The Department of Housing and Urban Development's mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination. HUD fulfills this mission through high ethical standards, management and accountability, and by forming partnerships with community organizations.

Office - All projects are processed in local HUD Multifamily Hubs or Program Centers.

Persons are encouraged to communicate with the nearest local HUD Office.

HUD Multifamily Hubs and Program Centers are listed at: http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm.


Program Accomplishments

No loans were insured in fiscal year 2007 and none are anticipated in fiscal year 2008.

Uses and Use Restrictions

HUD insures lenders against loss on mortgage loans.

These loans may be used to finance the construction or rehabilitation of multifamily housing structures by a sponsor intending to sell individual units as condominiums, which also would be eligible for the benefits of mortgage insurance under Section 234(c).

The program has statutory per unit mortgage limits which vary according to the size of the unit, the type of structure, and the location of the project.

There are also loan-to-replacement cost and debt service limitations.

Eligibility Requirements

Applicant Eligibility

Private profit-motivated developers, public bodies, and other sponsors who meet FHA requirements for mortgagors.

Beneficiary Eligibility

All families are eligible to purchase condominium units. Mortgages for individual units may be insured under Section 234(c). See program 14.133.

Credentials/Documentation

Documentation regarding the characteristics of the property and the qualifications of the mortgagor are assembled by the mortgagee and submitted with the application. This program is excluded from coverage under OMB Circular No. A-87.

Aplication and Award Process

Preapplication Coordination

The sponsor will have a preapplication conference with the local HUD Multifamily Hub or Program Center to determine the preliminary feasibility of the project before an application is submitted.

This program is excluded from coverage under OMB Circular No.

A-102.

An environmental assessment is required.

This program is eligible for coverage under E.O.

12372, "Intergovernmental Review of Federal Programs." An applicant should consult the office or official designated as the single point of contact in his or her State for more information on the process the State requires to be followed in applying for assistance.

Application Procedures

The sponsor submits a formal mortgage insurance application through a HUD approved mortgagee to the local HUD Multifamily Hub or Program Center. This program is excluded from coverage under OMB Circular No. A-110.

Award Procedures

The local HUD Multifamily Hub or Program Center reviews the application to determine whether the proposal is feasible. Considerations include market need, zoning, architectural merits, capabilities of sponsors, availability of community resources, etc. If the project meets program requirements, HUD issues the lender a commitment to insure the project mortgage.

Deadlines

Deadlines are established on a case-by-case basis by the local HUD Field Office.

Authorization

National Housing Act, as amended; Housing Act of 1964, as amended, Section 234(d), Public Law 88-560; Section 234(c), Public Law 90-448, 82 Stat. 476, 507, 1969; Section 234(c), Public Law 91-152, 83 Stat. 379, 384, 12 U.S.C. 1715(y).

Range of Approval/Disapproval Time

Processing time will depend upon the degree of preparation by the sponsor and the workload of field office.

Appeals

If an application for mortgage insurance is refused, HUD will state the reasons for the refusal. If reapplication is desired, the applicant may modify the application and reapply.

Renewals

The term of a commitment to insure may be extended under certain circumstances when more time is required.

Assistance Considerations

Formula and Matching Requirements

The maximum amount of the loan is 90 percent of the replacement cost, the sum of the statutory per unit limits, or sum of the unit mortgage amounts, whichever is less. The combined HUD site appraisal and market analysis application fee and commitment fees are $3.00 per $1,000 of the mortgage amount, and the HUD inspection fee may not exceed $5.00 per $1,000 of the mortgage amount, except that in all cases the combined application, commitment and inspection fee shall aggregate no less than $65 per unit for new construction or $50 per unit in rehabilitation cases. The mortgage insurance premium is one-half percent of the mortgage amount.

Length and Time Phasing of Assistance

The maximum mortgage term is 40 years, or not in excess of three-quarters of the remaining economic life, whichever is less, if the project remains a rental.

Post Assistance Requirements

Reports

Any change of the mortgagor during the period of mortgage insurance must be approved by HUD.

Defaults in meeting the mortgage terms must be reported.

All mortgagors are required to submit an annual financial statement to HUD.

All approved mortgagees at any time upon request by HUD must furnish a copy of their latest financial statement.

Audits

The Department of Housing and Urban Development reserves the right to audit the accounts of either the mortgagee or mortgagor in order to determine their compliance and conformance with FHA regulations and standards.

Records

Mortgagees are required to service and maintain records in accordance with acceptable mortgage practices of prudent lending institutions and the FHA regulations.

Financial Information

Account Identification

86-4077-0-3-371.

Obigations

(Mortgages insured) Reported under program 14.135.

Range and Average of Financial Assistance

The maximum amount of the loan is 90 percent of the replacement cost, the sum of the statutory per unit limits, or sum of the unit mortgage amounts, whichever is less. The program has statutory per unit mortgage limits which vary according to the size of the unit, the type of structure, and the location of the project. There are also loan-to-replacement cost and debt service limitations.

Regulations, Guidelines, and Literature

"HUD Mortgage Insurance Handbook No. 4580.1 For Condominium Housing Insured under Section 234 (d) of the National Housing Act, 24 CFR234; "HUD Mortgage Insurance Handbook No. 4265.1, Home Mortgage Insurance- Condominium Units, Section 234(c)", available on http://www.hudclips.org.

Information Contacts

Regional or Local Office

All projects are processed in local HUD Multifamily Hubs or Program Centers. Persons are encouraged to communicate with the nearest local HUD Office. HUD Multifamily Hubs and Program Centers are listed at: http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm.

Headquarters Office

Office of Multifamily Development, Department of Housing and Urban Development, 451 7th Street, S.W., Washington, DC 20410. Telephone (202) 708-1142. Use the same number for FTS.

Criteria for Selecting Proposals

Not applicable.



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