Do You Sign Appendix A When You Submit a Condo for FHA Approval?

wanamaker2Recently, Eric attended a two-day session about FHA condominium project approvals with HUD in DC.  Incomplete submissions and the Appendix A Project Certification were among the most important topics discussed.

First off, HUD will only review packages submitted by the following entities: Lender, Builder/Developer, HOA, Management Company, Attorney or Consultant.  They have been receiving packages from real estate agents, mortgage loan officers, unit owners and others.  Moving forward, any packages submitted by any entity who do not belong to the first group will be returned without review.

Secondly, incomplete packages submitted to HUD will be returned to sender prior to review.  It was not mentioned during the session as to whether or not HUD would include which document(s) are deficient.  HUD did say that those submitting approval packages should know what documents are to be included in the submissions.  Which leads to the next, and most important point…

Appendix A: Project Certification… so much to say here…

Appendix A is a signed document whereby the submitter certifies to HUD that: (1) the information and statements are true and correct; (2) the project meets all FHA condo approval guidelines; and (3) there are no known circumstances or conditions that might have an adverse affect on the condominium.  Appendix A was created in 2011 and modified in 2012.

Appendix A must be signed by the submitter.  There are many who submit FHA condo approval packages to HUD that are signed by someone other than the submitter.  Regardless of who signs Appendix A, the submitter is still responsible for the information contained in the submission package and will be treated as if he/she signed Appendix A.

Appendix A will be enforced.  Item #2 on Appendix A states that the condominium meets HUD’s requirements for project approval.  Moving forward, it will be enforced in that:

  1. If the project is not eligible for HUD approval, the submitter may be penalized.  $3500 per infraction was mentioned.
  2. Repeat offenders will be placed on HUD’s LDP list which means that they will not be able to work with HUD in any capacity.
  3. Repeat offenders may be prosecuted.  The maximum penalty for a false certification is up to 30 years imprisonment, $1,000,000 fine or both.

There will be no more “spaghetti tests” where submitters assemble a questionable package and send it to HUD.  If you submit a package to HUD that is not approvable, you could be subject to a $3500 fine.  If you submit many questionable packages, you could face further penalties according to Title 18 U.S.C. 1014 and land on the LDP list.

We have seen many condominiums that were previously approved by HUD that should not have been; everyone makes mistakes or guidelines may have changed since the previous approval.  Submission of these condominiums for recertification may result in penalties as mentioned above.  If you sign Appendix A, you are responsible for the package that is submitted to HUD.