Lender Won’t Close the FHA Condo Loan

joyfuldesigns_2_300pxWe have discussed in a previous article that an FHA condo loan can still close even if the condominium’s FHA approval has expired.  That is provided, however, that the FHA case number was assigned to the loan prior to the expiration of the approval.  The lender must verify that the condominium was approved at the time the case number was assigned and sign a certification to that effect.

A unit owner called me yesterday who has his unit for sale and has located a buyer.  The expiration of the condominium’s FHA approval was last month.  The buyer is using an FHA loan and the purchase agreement was signed prior to the expiration of the FHA approval.  The unit owner was concerned that he would lose the buyer if the FHA recertification did not come very soon.

I asked him if the case number had been assigned.  All FHA loans are tracked by a case number, which is acquired by the originating lender or broker at the onset of the mortgage loan process.  Case numbers are assigned to the property, not to the borrower.

Case numbers are portable and transferable. They are transferable in that if an FHA buyer backs out of a loan and another steps in to purchase the same property, the case number is transferred to the new buyer.  It is portable meaning that it can move if the borrower decides to change lenders and still buy the same property.  This way, the borrower is not tied to any particular lender just because the case number has been assigned.

The unit owner’s concern about losing the buyer is apt.  However, there might already be a solution:

  • If the buyer’s case number was assigned prior to the expiration of the FHA approval, FHA will allow the loan to close.  We need to find out this information.
  • If it was assigned prior to the expiration, will the lender close the loan?  FHA will allow it, but will the lender do it?
  • If the lender does not want to close the loan until the condominium is recertified, find a lender who will.  I have heard of more than a half dozen FHA condo loans that closed AFTER the expiration of the condominium’s approval.

It is expected that the condominium will be recertified with FHA soon.  But if it isn’t, this unit owner may still be in luck if the case number was properly assigned even if the current lender is unwilling to close the loan.

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