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Builder lied about FHA "spot" approval

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cupidslj

Junior Member
What is the name of your state (only U.S. law)? md


I signed contract on June 13 with FHA financing contingency. The builder said that they were not FHA approved yet but could get a "spot" approval just on my unit while they wait for the whole building to be covered. At the end of July, I emailed the lender on the status of the loan app. After 1 week no response, I told my agent. Another week later I was told by my agent that the lender said that government auditors were reviewing them and to have patience these things take time. By the end of August, I found out that they were not eligible for such spot approval (noone told me this... I went to HUD) because PUDS are not eligible and because at the time the contract was signed they were only 43% sold (need to be 90%sold for spot approval). The lender refused to answer my email on why spot approval was a no go. She did tell me in early August that the condo site approval paperwork was sent out mid July and told my agent a different story (that their HUD app went out late August). The HUD rules on condos are supposed to change Oct. 1. Under current rules they need to be 70% sold. The new rules would get them approval at 51% sold. I feel like they gambled my contract on them selling more units. I don't feel that I should have to wait for new rules to take effect either because I may miss out on $8000 credit. I would have never signed contract knowing it was contingent upon them selling more units and if the builder hadn't assured me that they could get a "spot" approval within a couple weeks. As of today Sept 18 they are not on HUDs list of approved condos (not even as pending). How long can lender keep me in limbo to buy time for builder. Do I have any recourse to have my deposit returned so I can persue other options?
 


nextwife

Senior Member
A builder is not a HUD employee. They WERE pursuing spot approval, and, perhaps, based on past experience, they would have been granted it. However, there is a significant change in the market, and what may have been approved in the past by HUD might not fly today. Their lending contact may have been telling them the spot approval was imminent. But a builder is not a lender (normally).
 

cupidslj

Junior Member
serious doubts

I understand that the builder doesn't work for HUD, but that doesn't mean that they are not familiar (based on past experiences) with what qualifies them for a spot approval or site approval. The lender should be more familiar since they are the ones that actually submit the paperwork. At the point that they realized (somehow I think they knew they were a PUD and didn't have near enough units sold) that the spot approval wasn't attainable, no one has expressed this to me. Then I find out that the lender lied to me as to when the entire site approval application went to HUD. Why would she do this? So I am hooked into a contract until they qualify or actually get approved? All the while they pass the blame around between the builder, my agent, and the lender. There has to be a law providing for omission and misrepresentation of material fact. It doesn't make sense to me how my FHA financing addendum to my contract is even valid on an FHA unapproved property. I can't get FHA loan if they are not approved. They can keep stalling and claiming its HUDs fault (why quite possibly waiting for the HUD rules to change). How long can they play this game with me? From what I am now learning, HUD could be bottlenecked for the next 6 months
 

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