This is a question that arises now and again.  A condominium gets approved with FHA and then a borrower has difficulty obtaining a loan because the FHA concentration is above 50%.

Such is the case with one of the condominiums we helped to get recertified last year.  The loan officer sent an email to the property manager stating that the FHA concentration was 75% and inquired if she knew that.  She then contacted me concerned that this was a problem and asked for an explanation.

Here is my reply:

FHA “concentration” means the percentage of units that are encumbered with FHA financing. According to FHA’s site, 75% of the units in the condominium are financed with FHA loans.   FHA allows up to 50% of the units to be financed with FHA loans but allows exceptions for projects that meet the following criteria:

• The project has at least four (4) units. YES
• The project is 100 percent complete and construction has been completed for at least one year, as evidenced by issuance of the final or temporary/conditional certificate of occupancy for last unit conveyed;  YES
• 100 percent of the units have been sold and no entity owns more than 10 percent of the units in the project;  YES
• The project’s budget provides for the funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 10% of the budget; YES
• Control of the Homeowners Association has transferred to the owners; YES
• The owner-occupancy ratio is at least 50 percent. YES
• The exception terminates with the expiration of the current project approval.

According to these criteria, the condominium qualifies for the exception.  As such, FHA will allow up to 100% of the units to be encumbered with FHA financing.

However, standard procedure does not apply once the concentration surpasses the 50% mark.  FHA Case Numbers cannot be assigned using the FHA Connection system.

[A Case Number is the tracking device that HUD uses for all FHA loans and a loan cannot be processed without one.]

The lender must contact the jurisdictional Home Ownership Center (HOC) to be granted the exception and acquire the Case Number.  In this case, the HOC is in Philadelphia; the lender should know who to contact there.

Please let me know if you have any questions about this or if I can help facilitate the loan approval.

Top Photo Credit: (c) Can Stock Photo / kenhurst