Form HUD-92561, in which a borrower agrees with HUD to not use, for hotel or transient use purposes, the condominium unit secured by his loan, is required under FHA Single Family Handbook 4155.1 ch. 2.B.4 and 4.B.4.e to be given in connection with multi-unit and investment properties. FHA ML 93-29 also requires it to be given in connection with a “single family dwelling which is one of a group of five or more dwellings owned by the same borrower,” which could include second homes. We currently provide duplicates of this form as Cx48 (which prints for second home and investment properties) and Cx5014 (for owner-occupied, multi-unit dwellings).
FHA Information Bulletin 13-42 was recently issued in which the FHA set forth additional rules to address recent problems in which “condominium project approval applications have been submitted with language that allows rental of a unit for less than 30 days, use of a unit for hotel purposes, or contains mortgagee exemption clauses,” which means that if such projects are approved, borrowers with units in such projects will be allowed, under the terms of the condominium association’s bylaws, to use their units for hotel and transient use purposes.
In this Bulletin, FHA sets forth several different requirements for mitigating this problem. One of them is as follows:
“All borrowers will be required to execute (sign and date) form HUD-92561, Borrower’s Contract with Respect to Hotel and Transient Use of Property. A copy of the executed form must be provided in the case binder submitted for insurance endorsement – this include [sic] loans insured under the Lender Insurance authority. This requirement is applicable for all condominium loans using FHA insured financing.”
Because this requirement is “applicable for all condominium loans using FHA insured financing,” it has become necessary to ensure that Form HUD-92561 prints in all loan document packages for FHA loans which are secured by a condominium unit, not just for loans secured by second home and investment properties.
For this reason, we have made another duplicate of this form (Cx17814), which will print for all owner-occupied condominium units.
This form will begin printing in closing packages on August 31, 2013.
August 26, 2013