Single Unit Approvals
On 10/15/2019 HUD officially implemented the Single Unit Approval process we’ve all been waiting for. While many industry insiders released press releases and articles praising the new program, it’s not nearly as simple or as easy as people hoped. Our team is fielding multiple phone calls and emails daily regarding the process.
To help clear up the situation, this is what you need to know:
- The new FHA “Single Unit” Approval program was implemented on 10/15/2019.
- This is an entirely new program – and NOT the “Spot Approval” program favored by lenders in the past.
- The SUA program will allow individual units to obtain FHA Loans without full project approval. This includes forward mortgages, refinances, and reverse mortgages.
- The SUA process must be handled by a lender that employs Direct Endorsement Underwriters. Condominium Associations, Realtors, and Lenders without DE Underwriters are NOT allowed to apply directly for a SUA.
- The Condominium Association will need to meet guidelines set forth by HUD.
- The SUA guidelines exclude many standards set forth in the full project approval; SUAs may be used in some communities that do not qualify for full project approval due to the more lax regulations.
- The Management Company/Board of Directors must complete a questionnaire and supply necessary documents. This process cannot be completed without participation from either the Management Company and/or Board of Directors.
- Upon receiving conditional approval from HUD, the participating lender is required to confirm that the association qualifies for Single Unit Approval before issuing the loan.
- Although most SUA case files are currently being reviewed HUD, the future liability and burden of responsibility remains with the authorizing lender. For this reason alone, most lenders do not participate in the Single Unit approval process.
Simply put, the Single Unit Approval process may be a shortcut if you are using a Direct Endorsement lender. If you would like more options, full project approval is the best option.
Also, it is important to know that there is no streamlined process for obtaining a SUA for additional units in the same community. The entire process must be repeated with a complete set of documents and a new questionnaire.
SUA Basic Requirements:
NOTE: The Condominium Project must also meet ALL SUA eligibility requirements. The list below are specific nuances to the SUA process vs the Full Project Approval.
- Condominium Project contains a minimum of five units
- Manufactured homes are not eligible.
- 10 units +: maximum FHA Concentration rate of 10%
- Less than 10 units: maximum of (2) units may be FHA Insured.
- Commercial Space: maximum 35% (no exceptions)
- Owner Occupancy: minimum of 50% owner occupied (no exceptions)
- Condominium Project is not currently “Approved” or been previously rejected for an adverse determination.
- Condominium Project meets all FHA Property Standards.
Benefits of Full Project Certification:
- The entire Condominium Association is FHA Approved for (3) years.
- There is a “Streamlined” Renewal process
- Community Managers will only need to visit the issue once every (3) years. With the SUA process, it is likely to be a constant and repetitive time burden.
- Units within Condominium Projects with Full Project Approval can be marketed as “FHA Approved”.
- HUD authorizes the Approval and the lender does not have to take on unnecessary liabilities.
How we can help with the Single Unit Approval Process:
- As a professional service to lenders, banks, mortgage companies, and brokers, FHA Review is offering an FHA Single-Unit Approval Case Binder. This custom report will allow lenders to prequalify a unit before going through the appraisal, and inspection processes.