There will be changes coming October 1, 2009 for developers of condo projects and existing condo owners who want to get Federal Housing Administration (FHA) approval for financing. The United States Department of Housing and Urban Development (HUD) has announced changes to their Condo Approval Process and elimination of "spot" approvals.

In the past, you only needed to satisfy one of the following two criteria to finance a condo unit using FHA financing. Either (1) the Condo Project has a FHA warranty, which would require the Homeowners Association of the condominium project to apply and receive a warranty on the project from the HUD; or (2) the unit must pass a questionnaire called a “Spot Check” done on an ad hoc basis.

However, the HUD just released an announcement that they will be changing the guidelines which includes the removal of “Spot Check” approvals. Therefore, you will only be able to get a FHA loan on a condo if the project has a warranty. (Mortgage Letter 2009-19).

WHAT THIS MEANS TO YOU IF YOU’RE A CONDO BUYER

Whether you’re looking to buy a condo using FHA financing or not, this should still affect your buying decision. Keep in mind that you do not want to buy a property that will be more difficult sell down the road. However, if you find a condo that does not have a FHA warranty and you really want to buy it, know that October 1st is the date the new guidelines go in affect. Also, many lenders have already adopted this policy prior to the date mentioned, so be sure to check your lender before applying. If you do buy using the “Spot Check” approval now, I would recommend you speak to the homeowners association about making the property FHA warrantable immediately after you close on your purchase.

WHAT THIS MEANS TO YOU IF YOU’RE ALREADY A CONDO OWNER

First, check immediately to see if your condo has a FHA warranty. If it has a FHA warranty, then you are good to go. If it is not a FHA warrantable condo, speak to the Homeowners Association immediately about getting the condo FHA warrantable. The key is to get your condo a FHA warranty prior to the October 1st date. Keep in mind that the turnaround time to get a warranty will be based on the amount of submissions the HUD receives. Everybody will likely flood the process after they realize how important this is.

Today, FHA loans now represent about 25% of all home purchases. Therefore, if you are selling a condo in a complex that does not have a FHA warranty; you are eliminating at least 25% of your potential buyers. Evidence of our current real estate market has shown that when the ability to obtain financing for a property becomes more difficult, the values of the property usually drop. Therefore, this will have a great impact on the condo markets, especially in Austin, since it will be more difficult to obtain loans for your condos.

Is the IRS going after the big fish?

The Internal Revenue Service (IRS) has recently offered a program that will allow tax evaders in offshore accounts to come forward to disclose these accounts for a lesser penalty. The IRS has set October 15, 2009 as their deadline to voluntarily disclose any of their offshore accounts. However, most taxpayers with offshore accounts have been waiting until the last minute to see what happens. The IRS reports that an estimated $14.8 billion dollars of taxes goes underreported due to offshore accounts each year. The UBS estimates that approximately 52,000 foreign accounts go unreported each year. Recently, the UBS has disclosed over 4,500 accounts to the IRS. That means that approximately one out of every ten accounts will be disclosed. This has most taxpayers with offshore accounts worried because if they are within one of those reported accounts, the taxpayer could pay penalties that could amount to more than double what the taxpayer has in their accounts and possible criminal prosecution. Do you have the 10% chance of being discovered? Naturally, people think that the IRS only goes after the “big fishes” or taxpayers with bigger accounts. However, recent reports have indicated that the IRS is going after anyone in order to get their delinquent taxes back.

Recently, a Los Angeles man plead guilty for failing to file a FBAR pursuant to the Bank Secrecy Act 31 USC 5314. The amount of unpaid taxes he owed was between $200,000 and $400,000 over a 5 year period. Assuming he was in a 33% tax bracket rate, the Los Angeles man’s unreported income would have equaled about $120,000 per year. This man eventually agreed to a civil FBAR penalty equal to 50% of his highest year balance and in addition a 75% civil tax fraud penalty.

This goes to show that the IRS is targeting anyone, not just the bigger fish. In the end, it’s best to be honest with the IRS and disclose any information necessary. Otherwise, it can catch up to you and become disastrous. Contact a tax attorney today to discuss your individual tax case.