HOAleader.com - Tip of the Week - July 15, 2011
Published: Wed, 07/06/11
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FHA Condo Loan Approval: New Glitches Arise
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In this week's tip, we provide answers to an HOAleader.com
reader's question.
Our reader writes, "We have been notified that we must apply
for FHA approval to provide reverse mortgages for our
homeowners. We've had FHA approval since 1978. However, we
must now begin the process all over. Our master deed contains
a 'right of first refusal' covenant, which, according to our
lender, FHA won't approve. Has anyone encountered this problem
and, other than amending the master deed, come up with a
solution?"
Under rules issued in 2009, the Federal Housing Administration
guarantees loans for condo purchases only if the entire
association has been approved for FHA financing. That's
required many condo associations to go through the FHA's
"recertification" process.
"Every condo has to get recertified with the FHA so we're
handling a lot of recertifications," says Elizabeth White,
a shareholder and head of the community associations practice
at the law firm of LeClairRyan in Williamsburg, Va.
"Every two years, they also have to apply for recertification.
That doesn't have to go through a bank or law firm. HOAs can
apply for those themselves. But we're finding they struggle
because there's an awful lot of data that has to be compiled.
Unless they have a particular skill set, they're better off
going with one of the organizations that has sprung up to
handle those."
Here's an example of the complexity: "The recertification
includes an application that requires you to certify your
delinquency rate and how many units are in arrears," says
White. "HUD also has a rule that you have to certify that
your accounts receivable doesn't exceed 15 percent and the
number of owners delinquent doesn't exceed 15 percent.
Yesterday, we had an association that had 15.2 percent
delinquencies, and we wondered: Does HUD round up or down?
In this situation, we'll ask the association to ensure that
to the extent there are bad-debt writeoffs, those are in the
numbers submitted to us. We don't want them to do anything
fraudulent. But some associations drag their feet in
writing off bad debt. This is one of those situations where
they're going to have to do it sooner rather than later."
You'll also have to submit your HOA's governing documents to
HUD, and that's where our reader's problem seems to have
emerged. To learn more, see our new article,
http://www.hoaleader.com/members/601.cfm
Best regards,
Matt Humphrey
President
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Recent articles posted at HOAleader.com:
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FHA Approval Twists for HOAs: Discussion Forum Follow-Up
A reader writes, "We have been notified that we must apply for
FHA approval to provide reverse mortgages for our homeowners.
We've had FHA approval since 1978. However, we must now begin
the process all over. Our master deed contains a 'right of
first refusal' covenant, which, according to our lender, FHA
won't approve. Has anyone encountered this problem and, other
than amending the master deed, come up with a solution?"
Click here to read full article:
< http://www.hoaleader.com/members/601.cfm >
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Repainting Your HOA's Parking Lot to Create More Spaces: Pros and
Cons
In homeowners associations that are tight on parking, one way to
create new spaces is to repaint your parking lines to create
smaller, yet more, spaces. But there are pros and cons. For
example, you could create more conflicts among owners because of
more frequent dings. And is there a possibility your association
could be sued for creating spots that are too small to avoid
dings? Here's some insight.
Click here to read full article:
< http://www.hoaleader.com/members/599.cfm >
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What Happens When Your HOA Governing Documents Conflict?
Discussion Forum Follow-Up
What should you do when your governing documents are
contradictory or ambiguous?
Click here to read full article:
< http://www.hoaleader.com/members/598.cfm >
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A Primer on HOA Districts
Some HOAs are divided into districts. Why? How do districts work?
Here, we explain.
Click here to read full article:
< http://www.hoaleader.com/members/597.cfm >
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The Rules for Appointing Members to Your HOA Board of Directors
One of your home owners association board members has been
removed or resigned. How should you appoint a replacement, and
what aspects of the process must be public or at least disclosed
to members? Here's the lowdown.
Click here to read full article:
< http://www.hoaleader.com/members/595.cfm >
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