There has been much confusion lately about the revised FHA Regulations regarding FHA Guaranteed loans for condominiums. The FHA itself is partly to blame for some of this confusion because they established Regulations, then modified them within 30 days in response to pressure from outside the FHA.
So, depending on the date you read something within the last quarter of 2009, you could have read conflicting information about the requirement for reserve studies for condominium associations.
Let us set the record straight!
1) FHA DOES require reserve studies for most condominium associations.
2) We, Facilities Advisors, inc. prepare reserve studies for condominium associations nationwide that meet the FHA reserve study requirements.
3) Facilities Advisors, inc. has been preparing reserve studies for almost thirty years.
Why do we say FHA requires reserve studies when everyone else says they don't? Because we read the Regulations.
FHA Mortgagee Letter 2009-46 B, dated November 6, 2009 requires that the association's budget review process " . . . ensure[s] sufficient funds are available to maintain and preserve all amenities and features unique to the condominium project." The only way that can be determined is through the preparation of a reserve study.
Some states have an even more stringent requirement. Another section of FHA Mortgagee Letter 2009-46 B, dated November 6, 2009 requires that subject any condominium project " . . . exists in full compliance with applicable State Law requirements of the jurisdiction in which the condominium is located . . .". Since many states have laws that require periodic preparation of reserve studies, or have laws that require disclosures to members that can only be derived from reserve studies, condominiums in those states must have reserve studies prepared or they will fail to comply with FHA Regulations.