On June 30, 2011 the United States Department of Housing and Urban Development (“HUD”) released Mortgagee Letter 2011-22, which updates the requirements that condominium association must comply with in order to obtain FHA approval.
Under the new requirements condominium association must provide HUD with even more information and documents then in the past. In the past some of the required information include information relating to the association’s delinquency rate, investor-to-owner ratio, explanations of special assessments as well as disclosure and explanations about pending litigation matters against the association. The standards also required that the association provide its recorded governing documents, budget, reserve account balance, FEMA flood map, and proof of insurance coverage, in particular, proper fidelity bond coverage.
The new requirements also imposes certain duties on the association if it engages the services of a management company. Under the new standards, the association’s management company is required to maintain insurance coverage for its officers, employees and agents handling or responsible for funds of the Condominium Project if the association is to obtain FHA approval. This required coverage must comport with HUD’s established mathematical equation for determining the requisite level of fidelity bond coverage and must name the condominium project as an obligee.
The FHA requirements are becoming more and more cumbersome. Of course, if members of the Board or management agents have any questions please contact your Whiteford, Taylor & Preston community association attorney for assistance. Copies of the recently released letter can be found at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/index.cfm.