FHA Drops the Hammer on Condominium Project Approvals

FHA recently announced changes to it's condominium approval process.   FHA's old policy of allowing spot approvals (individual unit approvals) with an abbreviated Documentation Package has been discontinued.  For a detailed outline of HUD's/FHA's new policy go to: https://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-46bml.pdf

FHA has announced that their will be choice between two avenues to follow in obtaining a project approval:
1) Lenders with Delegated Underwriting Authority may issue project approvals
or
2) Approval packages may be submitted to FHA for approval

At first glance, most would opt for a lender to approve their project.  However, the liabilities that FHA has imposed on the approving lender will probably cause most lenders to avoid the risk and instead forward the approval package directly to FHA for approval.  That will probably create a huge backlog at FHA, that by it's own admission, is seriously understaffed to handle current volume. 
Fallout from these changes will also spill over into the VA market since the VA's approval process is almost non-existant (meaning you don't want to try it over one deal).  The VA readily admits that it relies almost exclusively on the FHA approval list to allow a veteran to purchase in a condominium project.
For those of you who go to the HUD bulletin above, you'll also note a troubling FHA criteria relating to the density of FHA loans in a particular project which has basically been limited to 30% of the units. 
These changes could not have come at a worse time for a section of the housing market which is already hard hit.
Please contact me with any questions or if interested in obtaining a condominium project approval in the Houston area.  Comments are welcome.  So let me hear from you if you have anything to add to this information. 
www.johnshellington.com