Defined. The FHA is a government-owned insurance company. It does not loan money; it insures loans for buyers who cannot afford a conventional down payment. FHA insured loans now account for more than half of all new home loans. With an FHA insured loan, buyers can obtain:

•  low down payments (3.5% of the purchase price vs. 20% for conventional loans),
•  low closing costs,
•  easy credit qualifying, and
•  loans up to $729,750.

FHA Certification. On February 1, 2010, the FHA stopped giving spot approvals and now requires that condominium developments become approved as an entity. FHA certification is applicable to condominium projects, not PUDs. To qualify for an FHA insured loan, condominiums must be in a common interest development that has been "certified" by the FHA. Certification of the development means the association meets guidelines established by the FHA which it believes will reduce the risk of default on home loans insured by the FHA in that development. Once the association has been certified, buyers of condominiums in the development can apply for FHA insured loans. It does not mean buyers automatically receive FHA loans, they must still qualify as buyers.

Requirements. In November 2009, the FHA issued letters 2009-46A and 2009-46B outlining their certification requirements for condominium associations. Following are some of those requirements (readers should check the FHA website for complete and up-to-date information):

• At least 50% of the units must be owner-occupied. 
• No entity may own more than 10% of the units.
• Reserve contributions must be at least 10% of the budget.
• No more than 15% of the units may be more than 30 days delinquent.
• Must meet new insurance coverage and deductible requirements.
• If in a flood plain, must meet new requirements established by FEMA.
• No more than 25% of the development's floor space may be commercial.
• No more than 30% of the owners already have FHA insured loans.

For more detail, see the mortgagee Condo Approval Guide. Standards vary for associations still under developer control and for condo conversions. To find out if your association has FHA approval, go to the FHA website.

Loan Repackaging. Once a bank makes FHA-insured loans, it can sell them to Fannie Mae. Non-FHA insured loans can be sold to Freddie Mac.

Duty to Certify. Unless the governing documents provide otherwise, boards of directors have no duty to certify for their associations.