What processing options are available for lenders to obtain FHA approval of a condominium project?

There are two Condominium Project Approval process options:

  • HUD Review and Approval Process (HRAP) – Condominium review and approval issued by FHA staff; and
  • Direct Endorsement Lender Review and Approval Process (DELRAP) – Condominium review and approval issued by Mortgagees with Unconditional DELRAP Authority. 
To obtain Unconditional DELRAP Authority, a Mortgagee must:
  • have FHA approval as a Title II unconditional Direct Endorsement (DE) Mortgagee;
  • successfully complete the DELRAP Test Case Phase, which permits FHA to evaluate the Mortgagee’s qualifications, experience, and expertise to review and approve Condominium Projects;
  • have originated not less than 10 FHA-insured Mortgages in Condominium Projects approved by the Commissioner;
  • have at least one staff member with a minimum of one year of experience underwriting Mortgages on Condominium Units and/or reviewing Condominium Projects for FHA approval and must ensure that staff members participating in the approval of Condominium Projects either:
    • meet the experience requirement; or 
    • are supervised by staff that meet the one-year experience requirement.
  • have a Quality Control Plan that includes specific provisions related to DELRAP.
 
The Mortgagee must apply for Unconditional DELRAP Authority to the jurisdictional Homeownership Center (HOC) for the state where the Mortgagee’s home office is located.

The Mortgagee must submit a letter signed by a Corporate Officer requesting entry into the DELRAP Test Case Phase that:
  • specifies the Mortgagee’s home office 10-digit FHA Lender ID; and
  • certifies that the staff has met the eligibility requirements prior to Conditional or Unconditional DELRAP Authority being granted.
 
If the Mortgagee meets the requirements for DELRAP authority and submits the required documentation, FHA will advise the Mortgagee in writing that they may proceed with submitting Condominium Project Test Cases for review.

DELRAP lenders must:
  • Register all condominium reviewers in FHA Connection (FHAC); and
  • upload the condominium approval or denial documents (in PDF format) in FHAC within five business days of final disposition.
Condominium Projects must be reviewed in accordance with the Condominium Project Approval requirements to determine if the Condominium Project meets FHA approval requirements.  All test cases must be submitted to the jurisdictional HOC, which will review the Test Cases for compliance with FHA’s Condominium Project approval requirements.
 
The Mortgagee must satisfactorily complete a minimum of five DELRAP reviews with no more than one review being rated unacceptable. The jurisdictional HOC may require less than five DELRAP reviews and will consider previous experience. The Condominium Project Test Cases must be submitted within a period of 12 consecutive months following the date of application, or such other extended time frame as determined by the HOC, in order to be granted Unconditional DELRAP Authority.
 
After the Mortgagee successfully completes the required Condominium Project Test Cases, the Mortgagee will be notified that they have been granted Unconditional DELRAP Authority.
 
For case numbers assigned October 15, 2019 and after, additional information can be located in: Handbook 4000.1, Section I.A.5.e and II.C. available at:  https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
 
For case numbers assigned prior to October 15, 2019, information is available in:
  • Mortgagee Letter (ML) 2011-22 Condominium Approval Process for Single Family Housing – Consolidation and Update of Approval Requirements and the attached Condominium Project Approval and Processing Guide provides the requirements and procedures for obtaining FHA condominium project approval.
  • ML 2012-18 Temporary Approval Provisions for FHA Condominium Project Approval provides temporary condominium project approval guideline changes to address current housing market conditions.
  • ML 2015-27 Additional Temporary Approval Provisions for FHA Condominium Project Approval
  • ML 2016-15 FHA Condominium Project Approval – Owner Occupancy Requirements modifies the Condominium Project Approval and Processing Guide, attachment to ML 2011-22, in order to implement the Housing Opportunity Through Modernization Act of 2016 (HOTMA) requirements and establish the required owner-occupancy percentage that must be met for purposes of FHA project approval.
Note: The Temporary Provisions in ML 12-18 and ML 15-27, as modified by ML 2016-15, are effective until HUD publishes and implements the Final Rule of Condominium Project Approval through publication of the Condominium Project Approval Section of HUD Handbook 4000.1, as extended by ML 2017-13.  Mortgagee Letters are available at:  https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee

For more information regarding condominium projects refer to the FHA Condominium Mortgage Insurance page at:  https://www.hud.gov/program_offices/housing/sfh/ins/sfh_ins_condominiums

 


All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-02369