Most of the new guidelines set forth in the new Condominium Project Approval and Processing Guide became effective June 30, 2011; however, one new guideline which proves to be particularly concerning for associations does not become effective until August 30, 2011.

Section 2.4 of the new guidelines requires a Project Certification to be submitted with each request for condominium project approval.  The certification must be submitted on company letterhead and must be signed by an association representative, or its authorized representative (i.e. management company, project consultant, or attorney).

The certification requires the signing party to certify the following:

  • They have reviewed the project and it meets all state and local condominium laws and all FHA condominium approval requirements.
  • To the best of his or her knowledge and belief, the information and statements contained in the application are true and correct.
  • The submitter has no knowledge of circumstances or conditions that might have an adverse effect on the project or cause a mortgage secured by a unit in the project to become
  • delinquent including but not limited to:
    • Defects in construction;
    • Substantial disputes or dissatisfaction among unit owners about the operation of the association
    • Disputes concerning unit owner’s right, privileges and obligations.

In addition to the above requirements, and of great concern, is an additional requirement that the signator understands and agrees that the association is under a continuing obligation to inform HUD if any material information compiled for the review and acceptance of the project is no longer true and correct.  This implies that anyone submitting a project for approval must continually monitor the community for any changes to the community which would disqualify the community for FHA certification and inform FHA of the same.

The above certifications are substantially risky for any association wishing to submit for FHA certification, as the penalty for violations can carry fines up to $1,000,000 or imprisonment for not more than 30 years, or both.

More analysis and discussion with FHA is required at this time with respect to this issue, and we are unsure whether Altitude Community Law will continue with FHA certifications after August 30, 2011 due to the risk involved with the required Project Certifiation.

If you were holding off on seeking FHA approval and you meet the current guideline requirements, we strongly recommend you proceed immediately before August 30, 2011 when Project Certification statements will be required.  If you have questions regarding the FHA certification process or desire assistance obtaining certification, please contact our office at 303-991-2070.  For more information regarding the new FHA guidelines, read the following article, “Federal rules no boost to condominium industry” and visit CAI’s Mortgage Matters page.

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