Appraisal Practices in a Declining Market



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FHA CONDOMINIUM PROJECT APPROVAL PROCESS

Mortgage Originators need to know – HRAP processing timeframes will significantly increase

By Deni Archer

Senior Vice President

UHS America

As outlined in HUD’s Mortgagee Letter 2009-46(a), mortgage lenders have two condominium project approval options. They are: the HUD Review and Approval Process (HRAP) and the Direct Endorsement Lender Review and Approval Process (DELRAP). Under DELRAP, those FHA approved lenders that have Unconditional Direct Endorsement (DE) authority and have staff knowledgeable in reviewing condominium projects are authorized to review and grant FHA project approval status to projects seeking such approvals. The “spot loan” approval process that had been very popular with mortgage lenders was effectively eliminated by HUD/FHA in December 2009. This process had enabled lenders to originate and close FHA loans on individual loan transactions involving condominium units that were not located in an FHA approved condominium project.

In order to enhance FHA’s ability to process the large volume of condominium project approval applications that began being sent to the Homeownership Centers (HOCs) for HRAP project approval in 2009, the HOCs employed the services of UHS America. In this regard, a Condo Project Approval Team was formed comprising of 6 full-time UHS America employees in the Philadelphia HOC. Once established, the other three HOCs (Santa Ana, Atlanta and Denver) were advised to send all of their HRAP condo project applications that they considered as their “overflow” (or work that could not be done in a timely manner by HOC staff) to the Philadelphia HOC for processing by the UHS America team. This arrangement has worked extremely well for all parties involved. HRAP processing times were well within the 30 day target that was established by HUD and UHS America’s processing error rate (as determined by QC reviews by HOC staff) was consistently below 1%. UHS America’s Team has been processing over 1,000 project applications a month that past few months for HUD.

Unfortunately, the contract that UHS America had with HUD relative to condo processing expired on 9/30/11 and a new contractor is expected to begin operations soon. The impact of this change will be that HRAP processing times will begin to significantly increase. This concern was brought to the attention of those in attendance at four recent HUD condo processing training sessions by HUD Headquarters staff. The new HUD condo contractor will have a huge learning curve and time-delays in obtaining access to HUD’s systems for their new staff (who must all pass a background check).

In order to be proactive and address this major concern, UHS America has decided to retain their Condo Project Approval Team and to solicit lenders interested in having their condo packages screened & reviewed both for DELRAP and HRAP submissions. The goal will be to make a thorough review of a condo package within 48 hours of receipt and, for HRAP applications, render one of the following decisions:

* READY TO SUBMIT TO HUD – package is complete & will be sent via Fed Ex to the

appropriate HOC

* INCOMPLETE – a listing of items needed to bring the package to an approvable status will be

provided

• NOT HUD APPROVABLE – an explanation will be provided as to why it is not approvable

Having a well-prepared and documented HRAP submission package will significantly reduce the number of initially rejected condo project applications by HUD which will ultimately benefit the lender. Processing times for initially rejected condo project applications will be substantially greater than what was experienced in the past.

For DELRAP submissions, UHS America will provide similar feedback to the lender so that they can make their decision to approve or reject the condo project. It is anticipated that many more lenders will begin processing condo project applications utilizing the DELRAP option once HRAP processing times begin slipping. Having the benefit of such packages being reviewed by UHS America’s Condo Project Approval Team will give assurance to the lender that they will be compliant with any subsequent HUD reviews or audits. In addition, UHS America can assist DELRAP lenders in performing the required 10% Quality Control review of all DELRAP project approvals. This requirement is outlined in para. 4-3 of HUD’s Condominium Project Approval and Processing Guide.

Finally, UHS America offers training in a variety of ways (on-site, classroom style, webinars, etc.) for mortgage lenders to enhance their skills in meeting their underwriting responsibilities. For more information visit their website at .

UHS America

4 Hutton Centre Drive

Suite 240

Santa Ana, CA 92707.

(714) 513-6960

UHS America (East Coast Office)

1 Penn Center - Suite 1160

1617 JFK Boulevard

Philadelphia, PA 19103

Contact:

Deni Arciniega Archer, SVP

(714) 415-3548

deni@



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