The recent credit market crisis has limited the ability of residential condominium purchasers to obtain conventional loans. In response to this, developers of condominium projects have increasingly sought secondary market approval for their projects. However, secondary market requirements have been a moving target over the last two years as FHA, Fannie Mae and Freddie Mac have instituted significant program changes.

This program will give an overview of these recent changes and will include a discussion of the impact of HUD Mortgagee Letters 2009-46 A and 2009-46B issued on November 6, 2009 and whether of HUD Handbook 4150.1 Rev-1 and Appendix 24 to HUD Handbook 4265.1 Chg 4 continue to have applicability to FHA loans. Attendees will have the benefit of hearing from one of the secondary market lenders directly as Joseph L. Minnich, III with Fannie Mae in Washington, DC will discuss FNMA's program requirements and what they look for in processing applications for project approval.

This program will also compare and contrast the major FHA, VA, Fannie Mae and Freddie Mac requirements. Attendees will be provided with a Matrix of Secondary Market Requirements for Condominium Unit Loans by Ken Kuehnle of Allen Kuehnle Stovall & Neuman LLP, which organizes (by subject matter) the requirements of the various secondary market lenders, guarantors and insurers who deal in condominium unit loans, so that attendees representing developers can:

-Analyze what is needed in condominium documents to "qualify" the project; and

-Have a checklist of items to review when evaluating how difficult (or easy) it will be to qualify a specific project.

OUR EXPERTS:

Ken Kuehnle, Allen Kuehnle Stovall & Neuman LLP, Columbus, OH
Joseph L. Minnich, III, Fannie Mae, Washington, DC
Daniel Q. Orvin, Buist Moore Smythe McGee PA, Charleston, SC

FHA announced new borrower rules on January 20, 2009 that will, in all likelihood, make FHA loans significantly more costly. The new policy changes include:

1.Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending. The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.

2.Update the combination of FICO scores and down payments for new borrowers. New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.

3.Reduce allowable seller concessions from 6% to 3%.

On December 9, 2009, Ken Kuehnle of Allen Kuehnle Stovall & Neuman LLP and Dan Orvin of Buist Moore Smythe McGee PA provided an overview of HUD requirements for FHA condominium project approval and discussed the impact of Mortgagee Letters 2009-46 A and 2009-46B issued on November 6, 2009 and new regulations from Fannie and Freddie. Mortgagee Letter 2009-46B now provides the baseline guidance for FHA condominium project approval for case numbers assigned after December 7, 2009. Mortgagee Letter 2009-46A waives five provisions in that baseline guidance for case numbers assigned on or after December 7, 2009 through December 31, 2010 (except with regard to spot loans) and serves as a temporary directive from HUD to address current housing market conditions. A very interesting aspect of these new Mortgagee Letters is that they seem to replace the guidance of HUD Handbook 4150.1 Rev-1, Chapter 11 and HUD Handbook 4265.1 Chg 4, Appendix 24. Ken and Dan discussed secondary market (FHA, VA, Fannie Mae, Freddie Mac) requirements for condominium unit loans and Ken provided an overview of a matrix he created comparing and contrasting these requirements.

Ken's matrix as well as HUD Mortgagee Letters 2009-46A and 2009-46B have been included under Committee Resources below.