An appraiser on the Inland CA Appraiser forum posted the following question:
"I received information from a client that FHA recently issued a directive in Mortgagee Letter 2011-22 that "site condos" are to be placed on FNMA form 1073. Does FHA have a formal definition of a "site condo"? I know one when I see one but I wondered if FHA has the same concept that I do. If anyone can tell me where in the maze of FHA I can see a copy of their definition I would appreciate the help."
It just so happens that I own a property down in TN that is a "Site Condo" so the question spurred me on to do a little digging! What I found was HUD's Mortgagee Letter 2011-12
Prior to the release Mortgagee Letter ML11-22, HUD had exempted so-called “Site Condominiums” from the requirement to become approved in order for FHA financing to be allowed within the project. ML11-22 clarifies what a Site Condominium is in order for it to not be required to obtain HUD’s approval.
What IS a "Site Condominium" (per HUD)
According to Pg. 73 of Apendix C – Glossary (Condominium Project Approval and Processing Guide)
Site Condo - A site condominium is defined as a single family totally detached dwelling (no shared garages or any other attached buildings) encumbered by a declaration of condominium covenants or condominium form of ownership.
But WAIT . . .There's MORE!
Pg. 19, Unique Projects, section 1.8.1 of the (Condominium Project Approval and Processing Guide) further outlines and defines what a Site Condo is:
Condominium project approval is not required for Site Condominiums meeting all of the below defined requirements.
Site Condominiums are defined as:
- Single family totally detached dwellings (no shared garages or any other attached buildings or e.g. archways, breezeways); and
- Are encumbered by a declaration of condominium covenants or condominium form of ownership; and
- The condominium unit consists of the entire structure as well as the site and air space and are not considered to be common areas or limited common areas; and
- Insurance and maintenance costs are totally the responsibility of the unit owner; and
- Any common assessments collected will be for amenities outside of the footprint of the individual site.
Condominiums that do not meet this definition will require full project approval.
Manufactured Housing Condominium Projects (MHCPs) may not be treated as Site Condominiums - these projects require approval under the HRAP option. Modular homes are processed as single family homes for insurance purposes and are eligible to be treated as Site Condominiums as long as they meet the stated definition.
OK! So I know what a Site Condo IS, but I thought we always reported them on the Fannie Mae 1004 appraisal report. Right? That WAS true . . . until this ML.
It was Mortgagee Letter 2009-46B on page 14 under Section VI Site Condominiums that stated:
Appraisal data is collected and reported on Fannie Mae form 1004, in accordance with the Valuation Protocols, Appendix D of HUD Handbook 4150.2.
3.14 Site Condominiums (pg. 51 ) of (Condominium Project Approval and Processing Guide) states:
Although not subject to the general condominium approval requirements, the applicable ADP codes for Site condominiums are 731 (Adjustable Rate Mortgages) and 734.
Appraisal data is collected and reported on Fannie Mae form 1073, Individual Condominium Unit Appraisal Report.
The Condominium Rider (Appendix G) must be included in the FHA case binder submitted for insurance endorsement.