Well, it’s a bit of a long response so here goes. Hope it helps others,

The new FHA guidelines regarding re-certification of existing condo projects is, in my opinion, meant to insure that the projects continue to meet FHA’s minimum requirements and to manage its risk under the FHA Mortgage Insurance Program. This program protects lenders from loss if a borrower defaults on a loan. FHA has specific requirements to assure that the project they are insuring is sound and well managed. If it is not, the borrower could be adversely affected and any subsequent hardship could present a problem, ultimately, to FHA.

A majority of existing approved projects have been on FHA’s list for years, some even for decades. During that time, especially during the last couple of years, the economic downturn coupled with a high volume of foreclosures nationwide has put many projects into troubled waters. Home owner’s associations are experiencing budget and cash reserve problems due to foreclosed units in their projects and high delinquencies on monthly association fees. Some have had to levy special assessments to maintain operating expenses and others have become involved in litigations. Low owner occupancy ratios within projects is also a concern.

As for what all this means to you and other borrowers seeking FHA financing on a condominiums after November 2nd, your options will be greatly reduced. Until, at least, lenders step up and begin to take it upon themselves to re-certify existing projects using the new Lender Review and Approval Process outlined by FHA. Failing this, Condo HOA’s must realize the importance of having their projects on FHA’s approved list and work directly, if necessary, with FHA to have their projects re-approved.

Ultimately, properties will begin to repopulate the FHA approved list, but how long it will take is uncertain at best. I would recommend to you, as an immediate course of action, to try and find a property to your liking and get it into escrow before the November 2nd deadline. Also, try to avoid “short sales” and stay with regular listings or REO properties due to the time constraints before the new changes take effect.