FHA Policy Change Results in Rejection of FHA Recertification Applications

If your association is considering obtaining an FHA recertification, you may be interested in the latest abrupt change in FHA’s policies.  The FHA suddenly started rejecting recertification applications due to common wording in the leasing provisions in CC&Rs.  If the CC&Rs state that owners cannot lease for less than 30 days, there is no problem.  In fact, this minimum lease period is required.  However, if the leasing provisions state that owners cannot lease for less than 30 days, except for lenders or investors who foreclose on a unit, then FHA will now reject the association’s application for recertification.   In the 1980s and 1990s, Fannie Mae and Freddie Mac insisted that this exception to the minimum lease term be included in CC&Rs to provide more flexibility for foreclosing lenders in the management of their REO properties.  Many association seeking FHA recertification will be adversely affected by this new FHA policy and will have to amend their CC&Rs before they can obtain FHA approval.

Kathy Mills