A reverse mortgage on a non-FHA condo is a process problem: the HECM path stops until the project is acceptable, and a proprietary path only starts if that overlay actually likes the building. Jay Zayer, CRMP, is a reverse mortgage specialist at reversemortgage.coach. See condo application when the project might pass. Stay here when it is not on FHA’s list. Do not order the unit appraisal first.
What this looks like in practice: Quen, 74, occupies a unit in Fountain Hills, Arizona, and a board member said “we’re going to apply to FHA after the holidays.” That is a wait, not a file. Run leftover cash only after someone confirms a path exists.
A HECM remains FHA-insured. An unapproved project is not a public exception.
What is the process if the condo project is not on FHA’s list?
Stop. Confirm the roster. Ask whether the HOA will pursue FHA approval, and on what calendar. Ask whether a proprietary channel Jay originates will accept the project without that roster. Occupancy under 24 CFR 206.39 still has to be true. Counseling still costs $125–$175. Do not spend it on a building with no path. Arizona Fountain Hills has no Civil Code 1923.2(k) pause. The 180-day certificate still expires while a board “thinks about it.”
Quen’s leftover cash still lands in a mid-30s to low-50s percent of appraised value, depending on age and expected rate — after HOA dues sit in residual income. A pretty unit does not change the project.
Can the HOA start an FHA approval while I wait, and what does that wait cost?
The board can start. I will not invent how long HUD or the HOA packet takes. Counseling certificates last 180 days. A wait that eats 180 days is a second $125–$175 invoice. Initial MIP is still 2.00% of claim amount (Mortgagee Letter 2017-12) if a HECM ever endorses. Origination is still capped at $6,000 under 24 CFR 206.31. Waiting does not discount MIP.
A second geography: a 68-year-old in Dana Point whose California HOA refused to complete a questionnaire. Same federal project gate. Same leftover-cash gate. See what the association must prove.
If residual income requires a LESA, that set-aside is origination-only. Jay confirmed it cannot be added later. HOA dues that already break residual income will not be patched by a LESA you invent in month four.
On a complete house refinance I still mention a typical close near 30 days after the file is complete. Condo project approval is how 30 becomes a different year.
When is a proprietary condo overlay the actual next step?
When FHA project approval is a no, and a private note Jay originates will take the building. Those notes are not FHA-insured and do not charge HECM MIP. They have their own project rules. Compare a Loan Estimate. Annual MIP of 0.50% of outstanding balance is a HECM charge. Do not import it onto a private note. If the project later becomes acceptable, an adjustable HECM still indexes to 1-month CMT plus margin. Expected rate still rounds to 0.125% under 24 CFR 206.3.
If Quen’s heirs later keep the Fountain Hills unit, 24 CFR 206.125(a)(2)(i) still names the outstanding HECM balance if a HECM exists. A proprietary payoff follows that private note.
Arizona Fountain Hills has no Civil Code 1923.2(k) pause. The 180-day certificate still expires while a board “thinks about it.” California Dana Point still has the seven-day origination pause and still cannot order a unit appraisal as a substitute for project review. Occupancy under 24 CFR 206.39 still has to be true. Counseling still costs $125–$175. Do not spend it on a building with no path. Mortgagee Letter 2025-22 still sets the 2026 cap at $1,249,125. Initial MIP is still 2.00% of claim amount (Mortgagee Letter 2017-12) if a HECM ever endorses. Origination is still capped at $6,000 under 24 CFR 206.31. Waiting does not discount MIP.
Condo project approval is how a month-shaped complete-file close becomes a different year. Expected rate still rounds to 0.125% under 24 CFR 206.3 if a HECM later endorses on an approved project. If Quen later funds a HECM, the ARM still indexes to 1-month CMT plus lender margin. Annual MIP of 0.50% of outstanding balance is a HECM charge. Do not import it onto a private note. Proprietary overlays Jay originates — HomeSafe, Longbridge Platinum, Finance of America, Mutual of Omaha Secure Equity — skip FHA insurance. They do not skip their own project rules. Compare a Loan Estimate.
If residual income requires a LESA, that set-aside is origination-only. Jay confirmed it cannot be added later. HOA dues that already break residual income will not be patched by a LESA you invent in month four. A pretty unit does not change the project.
What I will not invent: how long an HOA FHA packet takes, a unit-appraisal shortcut, or a proprietary overlay that accepts every Fountain Hills building. Quen still has to occupy. HOA dues still sit in residual income. Project review is the stall. A board promise after the holidays is a wait, not a file. Order the unit appraisal only after someone confirms a path exists — FHA project approval or a private note Jay originates that actually likes the building.
Who should not pay for a unit appraisal on an unapproved project?
This path does not help a household that wanted granite photos in underwriting. Occupancy is still 24 CFR 206.39. I work with multiple lenders. I will originate when the project has a path. I will turn away a unit-first start whose only thesis is the kitchen.
If leftover cash after 2.00% of claim amount would have been decorative anyway, skip both paths. A non-FHA condo process cannot invent a building HUD already declined.