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 MUST still meet ALL eligibility requirements set forth for a Full Project Approval.
- At this time there is no subset of criteria that makes qualifying for an SUA easier than qualifying for a Full Project Approval.
- 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 is hardly a shortcut. While in some cases obtaining an SUA may feel like way to go. In reality it is rarely “Easier” and the guidelines are not any “Less Strict” than when obtaining Full Project approval. In fact, there are more guidelines to adhere to when using the Single Unit approval process.
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 standard eligibility requirements. The list below are specific nuances to the SUA process.
- 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 Report. This custom report will allow lenders to prequalify a unit before going through the appraisal, and inspection processes.
- This report is very similar to our Full Project Eligibilty review, and we ultimately recommend applying for the Full Project approval, as we can see no benefit to a lender, realtor, community manager, or condominium resident to utilize the SUA process.