As tough as it is for new buyers to obtain financing today, some condo owners are facing difficulties even applying for FHA loans and FHA-insured reverse mortgages because of association board members denying their requests for FHA approval.
This recently happened in Chicago to an 80-year-old woman who lives in the Gold Coast neighborhood, according to ReverseMortgageDaily.com. She owns her condo, valued at $800,000, and wanted to adjust her loan. However, the board voted against obtaining FHA approval.
The Los Angeles Times are reporting that this is negligence on the association boards’ part. By denying the request to apply to become FHA-approved, these board members are withholding rights that property owners have.
“As authorized with the passage of the Housing and Economic Recovery Act of 2008 (HERA), the Federal Housing Administration (FHA) implemented an approval process for condominium projects and insurance requirements for mortgages on individual units, under Section 203(b) of the National Housing Act,” states the FHA website.
By denying requests for FHA approvals, board members may be opening the doors to lawsuits if condo owners cannot obtain a reverse mortgage or FHA loan and, in turn, lose their property. If a condo owner misses the deadline for a loan, this may result in the board being held responsible for any fees that ensue. On top of that, they may also be facing charges of negligence and discrimination.
The LA Times also reported that no board director has the unilateral authority to control the assets of others, to decide what families can and cannot purchase in a development, and what mortgages are acceptable. Yet, that doesn’t seem to be stopping some association boards.
What an excellent article, but an unfortunate story about the elderly woman on the Gold Coast. FHA approval for a condo complex has become immensely important in the current economic climate. It should certainly be an option for any condominium complex to have at their residents’ disposal. It is troubling to hear that certain associations are denying this opportunity to their residents, but it is not surprising. What many people don’t know is that FHA loans are strictly underwritten, moreso than traditional routes, and are fully insured by the US government. Any notion that FHA loan options bring in an “undesireable” crowd is pure myth. Our bank offers FHA approvals for condominium complexes free of charge, approvals not only allow more pain-free refinancing options, but it currently allows for better rates and lower monthly payments, again great article.
i know first hand that my condo building refuses to become FHA approved … this is causing me trouble as i would like to refinance but the best rates are available only through FHA loans & also since my building isn’t FHA approved, this limits potential buyers because the majority of home mortgages right now (somewhere in the range of 85% currently) are FHA loans …
FHA adds liquidity to the building. It also adds buyers who only put 3% down which is how we got into this mess.
Some people who don’t value liquidity may value having neighbors with more than 3% skin the building.
Its not the undesirable crowd. Maybe its the undersirable 97% leverage.
Today’s underwriting standards are vastly different from the days of of the subprime market. Before we “got into this mess”, no income or credit documentation was required to close a loan. FHA loans were underutilized because they always had strict underwriting standards that required proof of income for affordability. Moreover, these simple subprime loans of yesteryear did not usually require mortgage insurance in the event that a borrower could not make their monthly payment. FHA loans requre mortgage insurance. In fact, even after the crisis, FHA beefed up their underwriting standards for good measure. FHA loans are as reliable as conforming/conventional products.
You are absolutely right Anthony! FHA loans were 1.7% of the market during the meltdown.
The crash had ZERO to do with FHA loans or buyers. Additionally, there were many people
who put 20% down and still lost their property using those toxic stated income and subprime
loans.! It’s the ignorant board members who have no concept of the illiquidity of the mortgage market and how that will affect the marketability of their condos. FHA is 56% of the current mortgage market, so you would have to be a complete MORON to deny approval when it is 56% of the buyers market. STUPID!!!
This is an excellent article about a growing problem in the Chicago area. I was just on the HUD FHA approved list site & many of my area’s associations have not recertified & have expired. If the approval has expired – no FHA loans! I don’t think that the board members truly understand the severity of not being approved. Whatever the market percentage is, no current homeowner can afford to turn away ANY buyers in this marketplace. In fact, I agreee with the determination that the board or more importantly the management company is negligent for not explaining the gravity of expiring. I bet that the homeowners themselves don’t understand either.
Talk about a ‘lynch mob’ mentality when the homeowners find out that the management thought better to remind them that they needed recertification.
If a Board does not want FHA buyers, they are going to find that their homeowners will lose value quickly as the majority of sales will be investors, not homeowners. Most condo buyers are first time howeowners and few have 20%. But investors do have cash and are buying up what they can right now.
When the owner occupied ratio declines, even conventional lenders will no longer lend. Turning away FHA buyers is very short sighted thinking. I too recently had a HOA Management owner tell me that he would not submit for FHA Approval. I agree that he holds a lot of liability if values fall and he did not put this before the Board.
I am experiencing this exact issue in LA! The moronic HOA president has no true concept of FHA or common sense for that matter. I am a buyer, but stepped forward and made the commitment to pay for a third party to transact the FHA condo approval process. She’s killing me with empty threats of legal ramifications. I want to yell at the top of my lungs!
The question is what can you do? Should I let her bully me around because she was voted to the top of the HOA 20 years ago? Anyone have any suggestions for me? She did make the claim that it was a board decision, but upon receipt of all of the recent meeting minutes, it became clear that she is acting unilaterally. IDIOT!
I was applying for a reverse mortgage and found out my board let the FHA approval lapse and refused to reapply. Do I have any rights.
My mother has lived at the Renaissance Condo Club in Mount Laurel, NJ since1986 when it first opened. During that time she was very active in the community including a term as President of the Homeowners Association. Her one wish was to be able to stay in her home until the end and for the past two years, I have been helping her do just that. She is 92yrs old and in reasonably good health but she may outlive her savings so I have been looking into FHA backed Reverse Mortgages. This Renaissance Club Condos had FHA approval from 1988-2011 but the current board let it lapse. I have offered to pay for a group that will get the FHA approval reinstated and only need the board to provide the paperwork conveniently listed in a prepared checklist. I have been told that the board will not allow FHA certification because as the outgoing president stated to me, “We don’t want those kinds of people living here”. Discriminatory to say the least and not at all responsive to the needs of the elderly residents, like my mother, who would benefit from FHA approval. Is it the case that since this story ran in 2011, there has been no progress in resolving this denial of a homeowners rights by a few individuals on a HOA board?
Late last year,around December me and my husband decide to move our family from New York to south Florida by February,2018 to secure a Condominiums apartment.It was pretty clear from the onset of our search for a rental that we’d likely be dealing with an HOA as almost every place we found had one.we finally found a very comfortable and conducive place for us and our little kids.They approved us and presented us with the HOA applications which should be sent back ASAP to begin the process,but then we have credit cards fraud some months ago,also our credit scores are 503 and 555,credit reports reads few collections.we stopped using CC for several months now because of the debts.we had an encounter with a our loan officer who introduced us to his secret hacker,if only we can pay for his services,we needed this ASAP because we love the condo.we both agreed to hire him because our LO gave us his word of sincerity,the hacker with the email(Freedom_hacking(@)HoTmail.COm)cleared our CC debts and collections in the first 3 days and Raised our scores to 805 which was also worked on for another 3 days.He is extremely knowledgeable about credit problems and hacking in general.we are so grateful to you for putting smile on our faces,he can render help if you contact him without doubting his ability.