FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Condominiums (04/10/2025)

FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Condominiums (04/10/2025)

c. Condominiums (04/10/2025) The Federal Housing Administration (FHA) will insure HECMs on Condominium Units (Units) in Approved Condominium Projects that have been approved under the HUD Review and Approval Process (HRAP) or Direct Endorsement Lender Review and Approval Process (DELRAP). In addition, FHA will insure HECMs on Units approved in accordance with the Single-Unit Approval section or that meet the definition and standards for a Site Condominium. i. Units Not Requiring Approval (A) Real Estate Owned Mortgages HUD Real Estate Owned (REO) HECM transactions do not require Condominium Project Approval or Single-Unit Approval. If the Unit is in a Condominium Project that has an FHA Condo ID, the Mortgagee must enter the FHA Condo ID when the FHA case number is requested. (B) HECM-to-HECM Refinances HECM Refinances do not require Condominium Project Approval or Single-Unit Approval. If the Unit is in a Condominium Project that has an FHA Condo ID, the Mortgagee must enter the FHA Condo ID when the FHA case number is requested. ii. Requirements for Units in Approved Condominium Projects The Mortgagee must verify the following requirements for individual Units located in an Approved Condominium Project or Legal Phase. (A) Condominium Project Approval Status The Mortgagee must confirm the Condominium Project is on the list of FHA- Approved Condominium Projects at the time of case number assignment and must enter the FHA Condo ID in the Federal Housing Administration Connection (FHAC) Case Assignment screen. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 753 Last Revised: 11/26/2025 (B) FHA Insurance Concentration (1) Definition FHA Insurance Concentration refers to the number of FHA-insured Mortgages within a Condominium Project. (2) Standard FHA may suspend the issuance of new FHA case numbers for a HECM on a Unit in a Condominium Project where the FHA Insurance Concentration is greater than 50 percent of the total number of Units in the Condominium Project. (C) Form HUD-9991, FHA Condominium Loan Level/Single-Unit Approval Questionnaire (1) Definition Form HUD-9991, FHA Condominium Loan Level/Single-Unit Approval Questionnaire, refers to a set of questions designed to collect pertinent loan, Condominium Project, and Unit information for FHA insurance endorsement. (2) Standard The Mortgagee must submit a completed, signed, and dated form HUD-9991. (D) Owner Occupancy Percentage (1) Definitions Owner Occupancy Percentage refers to the percentage of Units considered owner- occupied as shown in the calculation. (2) Standard The Mortgagee must determine the Approved Condominium Project has an Owner Occupancy Percentage of at least 35 percent of the total number of Units. The Mortgagee must report the Owner Occupancy Percentage in FHAC when the functionality becomes available. (3) Required Documentation The Mortgagee must submit form HUD-9991. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 754 Last Revised: 11/26/2025 (4) Calculation For the sole purpose of calculating the Owner Occupancy Percentage, the numerator of the calculation for a multi-phased Condominium Project includes the total number of the following Units in the first declared Legal Phase and cumulatively in subsequent Legal Phases, or for a single-phased Condominium Project, all of the following Units in the numerator of the calculation: • any Unit that is occupied by the owner as their place of abode for any portion of the calendar year and that is not rented for a majority of the calendar year; • any Unit listed for sale, and not listed for rent, that was previously occupied by the owner as their place of abode for any portion of the calendar year and that is not rented for a majority of the calendar year; or • any Unit sold to an owner who intends to occupy the Unit as their place of abode for any portion of the calendar year and has no intent to rent the Unit for a majority of the calendar year. For the sole purpose of calculating the Owner Occupancy Percentage, the following Units are included in the denominator of the calculation for a: • multi-phased Condominium Project, the total number of Units in the first declared Legal Phase and cumulatively in subsequent Legal Phases; or • single-phased Condominium Project, all Units. A Unit owned by the builder or developer is not an owner-occupied Unit. (E) Financial Condition (1) Units in Arrears (a) Definition Units in Arrears refer to each Unit with Condominium Association dues or any special assessments that are more than 60 Days past due. (b) Standard The Mortgagee must verify that no more than 15 percent of the total Units are Units in Arrears (does not include late fees or administrative expenses). (c) Required Documentation The Mortgagee must submit form HUD-9991. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 755 Last Revised: 11/26/2025 (2) Individual Owner Concentration (a) Definition Individual Owner Concentration refers to the percentage of Units owned by a single owner or Related Party. Related Party includes, but is not limited to: • an individual serving as the Unit owner’s officer, director, or employee; or • a Unit owner’s direct parent company, subsidiary, or any related entity with which the Unit owner shares a common officer or director. (b) Standard The Mortgagee must determine that for Condominium Projects with 20 or more Units, the Individual Owner Concentration is 10 percent or less. The Mortgagee must determine that for Condominium Projects with fewer than 20 Units, the Unit owner may not own more than one Unit. No Related Party may own a Unit. Exception Affordable housing Units owned by an eligible governmental or nonprofit program defined in 24 CFR § 203.41 are not subject to the Individual Owner Concentration requirements. The affordable housing Units must be identified by recorded legal documents. (c) Required Documentation The Mortgagee must submit form HUD-9991. (d) Calculation For the Individual Owner Concentration calculation: • on a multi-phased Condominium Project, the Individual Owner Concentration is calculated based on the total number of Units in the first declared Legal Phase and cumulatively on subsequent Legal Phases; or • on a single-phased Condominium Project, all Units are used in the denominator when calculating the Individual Owner Concentration, except unoccupied and unsold Units owned by a builder or developer, which are excluded from the numerator and denominator in the Individual Owner Concentration calculation. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 756 Last Revised: 11/26/2025 The Mortgagee must use the total number of declared Units in the Condominium Project for Complete Condominium Projects and Gut Rehabilitation (Gut Rehab) to calculate the Individual Owner Concentration. (F) Insurance (1) Walls-In (HO-6) (a) Definition Walls-In Insurance refers to insurance that covers the interior of the Unit and Personal Property inside the Unit. (b) Standard The Mortgagee must verify that the Borrower has obtained a Walls-In policy (HO-6) if the master or blanket policy does not include interior unit coverage, including replacement of interior improvements and betterment coverage to insure improvements that the Borrower may have made to the Unit. (c) Required Documentation The Mortgagee must submit form HUD-9991 and the certificate of insurance or complete copy of the insurance policy. (2) Hazard Insurance (a) Definition Hazard Insurance refers to insurance coverage that compensates for physical damage by fire, wind, or natural occurrences. (b) Standard The Mortgagee must verify that the Condominium Association has a master or blanket Hazard Insurance policy in place for the entire Condominium Project. The Condominium Association’s master or blanket Hazard Insurance policy must be in an amount to fully cover the insurable replacement cost of all Units and all insurable Common Elements in the Approved Condominium Project. The Mortgagee must verify that any policy with a coinsurance clause includes an agreed amount endorsement, selection of the agreed value option, or an amount of coverage to fully cover the insurable replacement cost of all Units and all insurable Common Elements in the Approved Condominium Project. The Mortgagee must verify that any pooled insurance policy satisfies the insurance coverage standard for each Condominium Project insured under the policy. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 757 Last Revised: 11/26/2025 The insurance policies must list the Condominium Association as the named insured, or, in the case of an affiliated Approved Condominium Project or Condominium Association, the name of the affiliated Approved Condominium Project or Condominium Association may be listed as a named insured. Hazard Insurance must be maintained over the lifecycle of the HECM. (c) Required Documentation The Mortgagee must submit form HUD-9991, the certificate of insurance or complete copy of the insurance policy, and if applicable, acceptable evidence of the replacement cost value. (3) Flood Insurance (a) Standard Flood Insurance for Condominiums must meet the requirements in Flood Insurance. The Mortgagee must verify that the Approved Condominium Project located in a Special Flood Hazard Area (SFHA) continues to meet the Flood Insurance requirements in the Condominium Project Approval section. The insurance policies must list the Condominium Association as the named insured, or, in the case of an affiliated Approved Condominium Project or Condominium Association, the name of the affiliated Approved Condominium Project or Condominium Association may be listed as a named insured. (b) Required Documentation The Mortgagee must submit: • form HUD-9991; • if applicable, the Letter of Map Amendment (LOMA), Letter of Map Revision (LOMR), or a FEMA NFIP Elevation Certificate (FEMA Form FF-206-FY-22-152); and • if applicable, the certificate of insurance or a complete copy of the Flood Insurance policy. (4) Exception for FHA Insurance Requirements This exception applies to Manufactured Home Condominium Projects, Detached Condominium Housing Projects, and Common Interest Housing Developments unable to satisfy the current insurance requirements. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 758 Last Revised: 11/26/2025 (a) Definitions A Manufactured Home Condominium Project (MHCP) refers to a Condominium Project that consists of two or more Manufactured Homes. A Detached Condominium Housing Project (DCHP) refers to a Condominium Project that has individual detached Single Family Dwelling Units, garage, and onsite improvements that are owned and maintained by the homeowner. The ground beneath the residential improvements is owned by the Condominium Association or Homeowners’ Association (HOA) or is under a long-term leasehold interest and considered common area or limited common area. A Common Interest Housing Development (CIHD) refers to a planned residential community that may consist of Units within a two- to four-unit building and/or contain multiple housing types, structured with different ownership interests, managed by a common Condominium Association or HOA, and governed under one Declaration of Covenants, Conditions, and Restrictions (CC&Rs). The CIHD may share a variety of common amenities and services. (b) Standard The Mortgagee must verify that the Unit owners and the Condominium Association or HOA comply with FHA insurance coverage requirements. (i) Manufactured Housing Condominium Project If the governing documents require the Unit owners to maintain all applicable property insurance coverage for the dwelling, site area, and any Personal Property contained within, the MHCP is not required to maintain: • a blanket Hazard Insurance policy, provided the governing documents require the Unit owners to maintain individual Hazard Insurance (Walls-In); • a Liability Insurance policy, provided the governing documents require the Unit owners to maintain individual Liability Insurance; or • a Flood Insurance policy, provided that the governing documents require the Unit owners to maintain individual Flood Insurance if the Unit has been identified as located in a Special Flood Hazard Area (SFHA). The Condominium Association or HOA must carry master or blanket insurance for Structures/improvements that are considered common areas of the project outside the footprint of the individual site. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 759 Last Revised: 11/26/2025 (ii) Detached Condominium Housing Project If the governing documents require the Unit owners to maintain all applicable property insurance coverage for the dwelling, site area, and any Personal Property contained within, the DCHP Condominium Association or HOA is not required to maintain: • a blanket Hazard Insurance policy, provided the governing documents require the Unit owners to maintain individual Hazard Insurance; • a Liability Insurance policy, provided the governing documents require the Unit owners to maintain individual Liability Insurance; and • a Flood Insurance policy, provided the governing documents require the Unit owners to maintain individual Flood Insurance. The Condominium Association or HOA must carry master or blanket insurance for Structures/improvements that are considered common areas of the project outside the footprint of the individual site. (iii)Common Interest Housing Development If the governing documents require the Unit owners of the detached Single Family homes, Site Condominiums, duplex, or two- to four-units within the project to maintain and carry property insurance for the dwelling, site area, and any Personal Property contained therein, the Condominium Association or HOA is not required to maintain: • a blanket Hazard Insurance policy, provided the governing documents require the Unit owners to maintain individual Hazard Insurance; • a Liability Insurance policy, provided the governing documents require the Unit owners to maintain individual Liability Insurance; and • a Flood Insurance policy, provided the governing documents require the Unit owners to maintain individual Flood Insurance. The Condominium Association or HOA must maintain and carry master/blanket Hazard, Liability, and Flood insurance for the Structures that contain the attached units and the common areas of the project. (c) Required Documentation The Mortgagee must submit form HUD-9991 and the certificates of insurance or complete copies of the insurance policies. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 760 Last Revised: 11/26/2025 (G) Leasehold Interest (1) Definition Leasehold Interest refers to real estate where the residential improvements are located on land that is subject to long-term lease from the underlying fee owner, creating a divided estate in the Property. (2) Standard The Mortgagee must determine if the Unit is owned under a Leasehold Interest and complies with the leasehold guidance. (3) Required Documentation The Mortgagee must document verification of compliance and submit the required documentation in the leasehold guidance. (H) Existing Less than One Year (1) Definitions Existing Less than One Year refers to a Property that is 100 percent complete and has been completed less than one year from the date of issuance of the CO or equivalent. The Property must have never been occupied. Complete Condominium Project refers to a Condominium Project consisting of Units that are Existing Less than One Year and that are ready for occupancy, including completion of all the Infrastructure of the Condominium Project, and not subject to further rehabilitation or construction. (2) Standard For Complete Condominium Projects, the Mortgagee must comply with the General Condominium Project Approval Requirements and the guidance in Construction and Inspection Requirements for New Construction HECM Properties. (3) Required Documentation The Mortgagee must submit required documentation for Existing Less than One Year under the guidance in Required Documentation for New Construction Properties. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 761 Last Revised: 11/26/2025 (I) Manufactured Housing (1) Definition Manufactured Housing refers to Structures that are transportable in one or more sections and meet the additional definition standards prescribed in Property Acceptability Criteria for Manufactured Housing for Title II Insured Mortgages. They may be part of an Approved Condominium Project, provided the Condominium Project meets applicable FHA requirements. A Manufactured Home refers to a single dwelling unit of Manufactured Housing. (2) Standard For a Manufactured Home, the Mortgagee must comply with the General Condominium Project Approval Requirements and the guidance in Property Types - Manufactured Housing. For HECM for Purchase transactions, the Mortgagee must comply with the guidance in Construction and Inspection Requirements for New Construction HECM Properties. (3) Required Documentation The Mortgagee must submit form HUD-9991 and the required documentation for Manufactured Housing under the guidance in Property Types - Manufactured Housing. iii. Single-Unit Approval Single-Unit Approval refers to approval of a Unit in a Condominium Project that is not an Approved Condominium Project. The Mortgagee must verify that the Unit and Condominium Project are in compliance with the following requirements. (A) Condominium Project Approval Status The Mortgagee must confirm the Condominium Project is not on the list of FHA- Approved Condominium Projects at the time of case number assignment. (B) Borrower Eligibility To be eligible for Single-Unit Approval, the Mortgagee must verify that the HECM Borrower: • meets the applicable Residual Income standard without the use of Compensating Factors; and II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 762 Last Revised: 11/26/2025 • has a Satisfactory Property Charge Payment History without the use of Extenuating Circumstances. (C) Property Eligibility The Mortgagee must confirm that the Condominium Project: • has a CO or equivalent for all units in the Complete Condominium Project or Complete Legal Phase; • has a CO or equivalent for the subject Unit that was issued at least one year ago or has been occupied; • has at least five Units; • is not a Manufactured Home; • does not have Ineligible Characteristics; and • is not located in an Approved Condominium Project or unapproved phase of a Condominium Project with an approved Legal Phase. (D) Requirements for Eligible Properties (1) FHA Insurance Concentration (a) Definition FHA Insurance Concentration refers to the number of FHA-insured Mortgages within a Condominium Project. (b) Standard FHA may suspend the issuance of new FHA case numbers for a HECM on a Unit in a Condominium Project when the FHA Insurance Concentration exceeds 10 percent of the total number of Units in the Condominium Project for Condominium Projects with 20 or more Units. For Condominium Projects with less than 20 Units, the number of FHA-insured Mortgages cannot exceed two. (2) Single-Unit Approval Case Number Assignment (a) Standard After submitting the case number assignment to Holds Tracking in FHAC, the Mortgagee must submit required information for case number assignment by email to the FHA Resource Center at: answers@hud.gov. The issuance of an FHA case number for Single-Unit Approval processing is not a Condominium Project Approval of the Unit nor the Condominium Project. All required documents and verifications are to be reviewed and completed as loan level requirements by the Mortgagee. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 763 Last Revised: 11/26/2025 (b) Required Documentation The Mortgagee must submit an email to the FHA Resource Center with the information requested in form HUD-9991in the following Sections: Mortgagee Information, Condominium Project Information, Condominium Association, and Occupancy Requirements by Construction Type, including the total number of Units in the Condominium Project for a case number assignment. Separate emails with the subject line “SUA Holds Tracking: Condominium Project Name” must be submitted for each case number requested. (3) Form HUD-9991, FHA Condominium Loan Level/Single-Unit Approval Questionnaire (a) Definitions Form HUD-9991, FHA Condominium Loan Level/Single-Unit Approval Questionnaire, refers to a set of questions designed to collect pertinent loan, Condominium Project, and Unit information for FHA insurance endorsement. Condominium Information Fee refers to a fee charged by a Condominium Association when requested to provide information and documentation used to determine eligibility for FHA-insured financing. (b) Standard The Mortgagee must submit a completed, signed, and dated form HUD-9991. If a condominium information fee is charged by the Condominium Association to complete form HUD-9991, the condominium information fee may be financed or paid in cash by the Borrower or Mortgagee. (4) Owner Occupancy Percentage (a) Definition Owner Occupancy Percentage refers to the percentage of Units considered owner-occupied as shown in the calculation. (b) Standard The Mortgagee must determine that the Condominium Project has an Owner Occupancy Percentage of at least 50 percent of the total number of Units. The Mortgagee must report the Owner Occupancy Percentage in FHAC when the functionality becomes available. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 764 Last Revised: 11/26/2025 (c) Required Documentation The Mortgagee must submit form HUD-9991. (d) Calculation For the sole purposes of calculating the Owner Occupancy Percentage, the numerator of the calculation for a multi-phased Condominium Project includes the total number of the following Units in the first declared Legal Phase and cumulatively in subsequent Legal Phases, or for a single-phased Condominium Project, all of the following Units are included in the numerator of the calculation: • any Unit that is occupied by the owner as their place of abode for any portion of the calendar year and that is not rented for a majority of the calendar year; • any Unit listed for sale, and not listed for rent, that was previously occupied by the owner as their place of abode for any portion of the calendar year and that is not rented for a majority of the calendar year; or • any Unit sold to an owner who intends to occupy the Unit as their place of abode for any portion of the calendar year and has no intent to rent the Unit for a majority of the calendar year. For the sole purposes of calculating the Owner Occupancy Percentage, the following units are included in the denominator of the calculation for a: • multi-phased Condominium Project, the total number of Units in the first declared Legal Phase and cumulatively on subsequent Legal Phases; or • single-phased Condominium Project, all Units. A Unit owned by the builder/developer is not an owner-occupied Unit. (5) Recorded Documents (a) Definition Recorded Documents refer to the Condominium Project’s legal, project, and governing documents that are required to operate legally as required by state and local law. (b) Standard The Condominium Project’s Recorded Documents must be recorded in accordance with applicable state and local law to ensure the Condominium Project can be legally operated in the local jurisdiction. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 765 Last Revised: 11/26/2025 (c) Required Documentation The Mortgagee must submit evidence that the Recorded Documents have been recorded. (6) Transfer of Control (a) Definitions Transfer of Control refers to the shift of existing control over the Condominium Association from the developer/builder to the Unit owners. Control of the Condominium Association refers to the ability to directly or indirectly control, direct, modify, or veto any action of the Condominium Association. (b) Standard The Mortgagee must verify Control of the Condominium Association has been transferred to the Unit owners and the Covenants, Conditions, and Restrictions (CC&R) have been recorded. (c) Required Documentation The Mortgagee must submit form HUD-9991 and recorded CC&Rs. (7) Financial Condition (a) Financial Stability (i) Definition Financial Stability refers to the ability of the Condominium Association to meet the Condominium Project’s needs in the future through positive cash flow and adequately funded reserves. (ii) Standard The Mortgagee must verify the Financial Stability of the Condominium Project and that: • the Condominium Association maintains separate accounts for operating and reserve funds; • a reserve account for capital expenditures and deferred maintenance that is funded with at least 10 percent of the aggregate of 12 months of Unit assessments, unless a lower amount is deemed sufficient based upon an acceptable reserve study; and II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 766 Last Revised: 11/26/2025 • no more than 15 percent of the total Units are Units in Arrears (does not include late fees or administrative expenses). (iii)Required Documentation The Mortgagee must submit form HUD-9991. (b) Financial Distress Event (i) Definition A Financial Distress Event refers to a Condominium Project or builder/developer that has: • sought protection under bankruptcy law; • been placed into receivership (mandated or voluntary); • been subject to foreclosure or any seizure of assets by creditors; or • offered a Deed-in-Lieu (DIL) of Foreclosure. (ii) Standard The Mortgagee must verify that a Condominium Project has not experienced a Financial Distress Event within the last three years. (iii)Required Documentation The Mortgagee must submit form HUD-9991. If applicable, the Mortgagee must submit a dated legal document evidencing Resolution of Financial Distress Event and a signed and dated explanation. (c) Individual Owner Concentration (i) Definition Individual Owner Concentration refers to the percentage of Units owned by a single owner or Related Party. Related Party includes, but is not limited to: • an individual serving as the Unit owner’s officer, director, or employee; or • a Unit owner’s direct parent company, subsidiary, or any related entity with which the Unit owner shares a common officer or director. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 767 Last Revised: 11/26/2025 (ii) Standard The Mortgagee must determine that for Condominium Projects with 20 or more Units, the Individual Owner Concentration is 10 percent or less. The Mortgagee must determine that for Condominium Projects with fewer than 20 Units, the Unit owner may not own more than one Unit. A Related Party may own a Unit, only if the Unit is owner-occupied and meets FHA’s principal residency requirements. (iii)Required Documentation The Mortgagee must submit form HUD-9991. (iv) Calculation For the Individual Owner Concentration calculation: • on a multi-phased Condominium Project, the Individual Owner Concentration is calculated based on the total number of Units in the first declared Legal Phase and cumulatively on subsequent Legal Phases; or • for a single-phased Condominium Project, all Units are used in the denominator when calculating the Individual Owner Concentration, except that unoccupied and unsold Units owned by a builder/developer are excluded from the numerator and denominator in the Individual Owner Concentration calculation. The Mortgagee must use the total number of declared Units in the Condominium Project for Complete Condominium Projects and Gut Rehab to calculate the Individual Owner Concentration. (d) Commercial/Nonresidential Financial Independence (i) Definition Commercial/Nonresidential Financial Independence refers to the ability of the Residential Space and Commercial/Nonresidential Space of the Condominium Project to be independently sustainable such that neither portion of the Condominium Project is financially reliant on the other. (ii) Standard For projects with Commercial/Nonresidential Space, the Mortgagee must verify there is Commercial/Nonresidential Financial Independence. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 768 Last Revised: 11/26/2025 (iii)Required Documentation The Mortgagee must submit form HUD-9991. For Condominium Projects with Commercial/Nonresidential Space, the Mortgagee must submit: • a current year budget approved by the board(s); • a year-to-date income and expense statement dated within 90 Days if the prior year to date actuals are more than 90 Days old; • an income and expense statement for the previous year’s actual year end results; and • a current balance sheet dated within 90 Days prior to the date of submission. (8) Insurance Coverage The Condominium Project where the single Unit is located must be insured to FHA standards as well as any applicable state and local condominium requirements. The insurance policies must list the Condominium Association as the named insured, or in the case of an Affiliated Condominium Project or Condominium Association, the name of the Affiliated Condominium Project or Condominium Association may be listed as a named insured. (a) Walls-In (HO-6) (i) Definition Walls-In Insurance refers to insurance that covers the interior of the Unit and Personal Property inside the Unit. (ii) Standard The Mortgagee must verify that the Borrower has obtained a Walls-In coverage policy (HO-6) if the master or blanket policy does not include interior Unit coverage, including replacement of interior improvements and betterment coverage to insure improvements that the Borrower may have made to the Unit. (iii)Required Documentation The Mortgagee must submit form HUD-9991 and a certificate of insurance or complete copy of the insurance policy. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 769 Last Revised: 11/26/2025 (b) Hazard Insurance (i) Definition Hazard Insurance refers to insurance coverage that compensates for physical damage by fire, wind, or natural occurrences. (ii) Standard The Mortgagee must verify that the Condominium Association has a master or blanket hazard insurance policy in place for the entire Condominium Project. The Condominium Association’s master or blanket Hazard Insurance policy must be in an amount to fully cover the insurable replacement cost of all Units and all insurable Common Elements in the Condominium Project. The Mortgagee must verify that any policy with a coinsurance clause includes an agreed amount endorsement, selection of the agreed value option, or an amount of coverage to fully cover the insurable replacement cost of all Units and all insurable Common Elements in the Condominium Project. The Mortgagee must verify that any pooled insurance policy satisfies the insurance coverage standard for each Condominium Project insured under the policy. Hazard Insurance must be maintained over the lifecycle of the HECM. (iii)Required Documentation The Mortgagee must submit form HUD-9991, a certificate of insurance or complete copy of the insurance policy, and if applicable, acceptable evidence of the replacement cost value. (c) Liability Insurance (i) Definition Liability Insurance refers to insurance that protects against legal claims. (ii) Standard The Mortgagee must verify that the Condominium Association maintains comprehensive Liability Insurance for the entire Condominium Project, including all common areas, elements, public ways, and all other areas that are under its supervision, in the amount of at least $1 million for each occurrence. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 770 Last Revised: 11/26/2025 Liability Insurance must be maintained over the lifecycle of the HECM. (iii)Required Documentation The Mortgagee must submit form HUD-9991 and a certificate of insurance or complete copy of the insurance policy. (d) Fidelity Insurance (i) Definition Fidelity Insurance refers to insurance that protects the Condominium Association against employee dishonesty, crime, or other fraudulent acts conducted by one or more employees. (ii) Standard The Mortgagee must verify that for all Condominium Projects with more than 20 Units, the Condominium Association maintains Fidelity Insurance for all officers, directors, and employees of the Condominium Association and all other persons handling or responsible for funds administered by the Condominium Association. The Mortgagee must verify that the insurance coverage is the greater of either: • three months of aggregate (12-month) assessments on all Units plus reserve funds (up to the maximum permitted by state law); or • the minimum amount required by state law. For existing policies, an uninsured amount within 3 percent of the above calculation or $10,000, whichever is less, is acceptable. If the Condominium Project engages a management company, the policy or policies must demonstrate that they specifically meet the standard for both the Condominium Association and the management company. (iii)Required Documentation The Mortgagee must submit form HUD-9991 and the certificate of insurance or a complete copy of the insurance policy from the Condominium Association and/or from the management company. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 771 Last Revised: 11/26/2025 (e) Flood Insurance (i) Standard The Mortgagee must ensure that the Flood Insurance for a Condominium Unit meets the requirements in/under Flood Insurance for an FHA-insured Mortgage. The Mortgagee must verify that Units in a Condominium Project located in a SFHA meet the Flood Insurance requirements in the Condominium Project Approval section. (ii) Required Documentation The Mortgagee must submit form HUD-9991 and the required documentation in the Condominium Project Approval section. (f) Exception for FHA Insurance Requirements The Mortgagee must verify that the Unit owners and Condominium Association or HOA comply with FHA insurance coverage requirements. (i) Detached Condominium Housing Project Eligibility If the governing documents require the Unit owners to maintain all applicable property insurance coverage for the dwelling, site area, and any Personal Property contained within, the DCHP Condominium Association or HOA is not required to maintain: • a blanket Hazard Insurance policy, provided the governing documents require the Unit owners to maintain individual Hazard Insurance (Walls-In); • a Liability Insurance policy, provided the governing documents require the Unit owners to maintain individual Liability Insurance; and • a Flood Insurance policy, provided the governing documents require the Unit owners to maintain individual Flood Insurance. The Condominium Association or HOA must carry master or blanket insurance for Structures/improvements that are considered common areas of the project outside the footprint of the individual site. (ii) Common Interest Housing Development Project If the governing documents require the Unit owners of the detached Single Family homes, Site Condominiums, duplex, or two- to four-units within the project to maintain and carry property insurance for the dwelling, site II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 772 Last Revised: 11/26/2025 area, and any Personal Property contained therein, the Condominium Association or HOA is not required to maintain: • a blanket Hazard Insurance policy, provided the governing documents require the Unit owners to maintain individual Hazard Insurance; • a Liability Insurance policy, provided the governing documents require the Unit owners to maintain individual Liability Insurance; and • a Flood Insurance policy, provided the governing documents require the Unit owners to maintain individual Flood Insurance. The Condominium Association or HOA must maintain and carry master/blanket Hazard, Liability, and Flood Insurance for the Structures that contain the attached units and the common areas of the project. (iii)Required Documentation The Mortgagee must submit form HUD-9991 and certificates of insurance or complete copies of the insurance policies. (9) Projects in Coastal Barrier Resources System or Special Flood Hazard Areas (a) Projects in Coastal Barrier Resources System If any part of the Condominium Project is located within the Coastal Barrier Resources System (CBRS), the Condominium Project is not eligible for FHA Single-Unit Approval. (b) Special Flood Hazard Areas If any portion of the Structures or equipment essential to the value of the Condominium Project is located within an SFHA, then the Condominium Project is not eligible for Condominium Project Approval, unless the Condominium Project meets the Special Flood Hazard Areas requirements in the Condominium Project Approval section. (10) Commercial/Nonresidential Space (a) Definitions Commercial/Nonresidential Space refers to floor area allocated to: • retail and commercial square footage (excludes Live/Work Units); • multilevel parking garage square footage that is separate from multilevel parking garage square footage allocated to residential Unit owners; II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 773 Last Revised: 11/26/2025 • building common areas not reserved for the exclusive use of residential Unit owners; and • any square footage that is owned by a private individual or entity outside of the Condominium Association. Residential Space refers to floor area allocated to: • all Unit square footage; • all building common area square footage exclusively for the use of residential Unit owners; and • all parking garage square footage allocated to residential Unit owners. Parking lot square footage is not considered Residential or Commercial/Nonresidential Space. Total Floor Area refers to all Residential Space and Commercial/Nonresidential Space. (b) Standard The Mortgagee must verify that the Condominium Project’s Commercial/Nonresidential Space does not exceed 35 percent of the Condominium Project’s Total Floor Area. (c) Required Documentation The Mortgagee must submit the following documentation: • form HUD-9991; • recorded condominium site plans; and • recorded CC&Rs. (11) Live/Work Unit (a) Definitions A Live/Work Condominium Project refers to a Condominium Project that allows space within the individual Unit to be used jointly for nonresidential and residential purposes. A Live/Work Unit refers to a Unit in a Live/Work Condominium Project. (b) Standard The Mortgagee must verify that the Condominium Project governing documents allow Live/Work arrangements. The Mortgagee must verify that the individual Live/Work Unit does not contain more than 49 percent Commercial/Nonresidential Space. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 774 Last Revised: 11/26/2025 (c) Required Documentation The Mortgagee must submit form HUD-9991. (12) Leasehold Interest (a) Definition Leasehold Interest refers to real estate where the residential improvements are located on land that is subject to long-term lease from the underlying fee owner, creating a divided estate in the Property. (b) Standard The Mortgagee must determine if Condominium Projects with Units or Common Elements owned under a Leasehold Interest are eligible and meet the following requirements: • The Condominium Association must be the lessee under the lease. • The lease of the Common Elements provides that a default of the Condominium Association does not result in a disturbance of any rights of the Unit owners. • The lease provides that the Mortgagee receives notice of any monetary or Non-Monetary Default by the Condominium Association and is given the right to cure any defaults on behalf of the Condominium Association. • The lease provides for the payment of taxes and insurance related to the land, in addition to those being paid for the improvements. • The Condominium Association must not be in default under any provisions of the lease. • The lease does not include any default provisions that could result in forfeiture or termination of the lease except for nonpayment of lease rents. • The Condominium Project must comply with the Title II Leasehold guidance as applicable. (c) Required Documentation The Mortgagee must submit the lease and comply with the required documentation in the Leasehold guidance. (13) Litigation (a) Definition Litigation refers to a current or pending lawsuit or proceedings in a court, arbitration, or mediation involving the Condominium Project or Condominium Association, or those concluded within 12 months of the II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 775 Last Revised: 11/26/2025 application date. Litigation does not include foreclosure or actions to collect past due assessments brought by the Condominium Association or Condominium Project as plaintiff. (b) Standard The Mortgagee must verify that the Condominium Project or Condominium Association is not subject to Litigation that relates to the safety, structural soundness, habitability, or functional use of the Condominium Project. The Mortgagee must verify that the Condominium Project or Condominium Association is not subject to any other Litigation risk not covered by insurance or that exceeds the amount of insurance coverage relating to the potential losses for that matter. (c) Required Documentation The Mortgagee must submit form HUD-9991. iv. Site Condominium (A) Definition A Site Condominium refers to: • a Condominium Project that consists entirely of Single Family detached dwellings that have no shared garages, or any other attached buildings; or • a Condominium Project that: • consists of Single Family detached or horizontally attached (townhouse- style) dwellings where the Unit consists of the dwelling and land; • does not contain any Manufactured Housing Units; and • is encumbered by a declaration of condominium covenants or a condominium form of ownership. (B) Standard The Unit owner must be responsible for all required insurance and maintenance costs associated with the Unit dwelling, excluding landscaping, of the Site Condominium. Site Condominiums do not require Condominium Project Approval or Single-Unit Approval. (C) Required Documentation The Mortgagee must submit the following documentation: • Condominium Rider; II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products - Condominiums (04/10/2025) Handbook 4000.1 776 Last Revised: 11/26/2025 • appraisal completed on Fannie Mae Form 1073/Freddie Mac Form 465, Individual Condominium Unit Appraisal Report, evidencing that all Units satisfy the Site Condominium definition; • certificate of Hazard Insurance or complete copy of the insurance policy evidencing coverage of the entire dwelling; and • if required under the Flood Insurance requirements in the Condominium Project Approval Section, certificate of Flood Insurance or complete copy of the insurance policy evidencing coverage of the entire dwelling. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT C. Condominium Project Approval

Source: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Condominiums (04/10/2025) · source URL · snapshot 8c03836f77f317e1