Another completely misguided and ill informed board making erroneous decisions that will have a long lasting, negative impact on the association and its property values.
Here’s a letter we received from a condo association board member stating the reason why they’ve declined to pursue FHA Approval for their condo.
“After thoughtful consideration, the Board has decided against registering the D***** Plaza Association with the Federal Housing Administration. While it is understandable that some of the programs offered by the FHA could be beneficial, they do not outweigh the fees or restrictions that the FHA requires, and can impose.
The following list includes some of the items that were considered when making the decision.
Recent changes to FHA guidelines and certifications.
New requirements for reserve studies for new conversions.
New and risky certification for special assessments.
New delinquency rules.
New and very risky project certification to be signed by manager or association.
Effective date for some changes is immediate.
Expanded financial records now required.
Fidelity insurance changes required.
FHA rejection for association loans and special assessments.
Thank you for bringing this matter to our attention and for the opportunity to research it more fully.”
- There are no real changes to FHA guidelines and certifications. Ninety percent of the qualifying criteria are the same as they have been for decades.
- There are no new requirements for reserve studies for new conversions.
- This conclusion is just plain bizarre. Special assessments are very frowned upon by HUD and their existence makes an HOA ineligible in most situations. There is no certification, and the “risky” comment is dumbfounding.
- There are also no “new” delinquency rules. Delinquencies can be no more than 15% of the total units, and it has been this way for decades.
- New and “risky” project certification to be signed by manager or association. This board member is referring to the Appendix A, which is signed under penalty of a million dollar fine and thirty years in prison. It states that the information is true and correct. However, this penalty only covers “fraud”, not innocent mistakes. The association only has to worry about this certification is if they are committing fraud. Additionally, if the HOA retains a consultant firm to process the application, the sponsor firm signs the Appendix A, releasing the association for liability under this document.
- Effective date for some changes is immediate? What does this even mean? It is complete drivel.
- Expanded financials now required. No they’re not. The required financials are the same that have always been required.
- Fidelity bond insurance must equal the sum of three months assessment, plus whatever is held in reserve. This association obviously doesn’t have enough coverage, so a dishonest board member or property manager could conceivably empty the association’s bank account, and there wouldn’t be enough insurance to cover the losses, which would need to be made up by the owners.
- FHA will reject an association that has special loans and assessment, because it is an indication of a poorly run and managed association. The monthly HOA assessment should cover ALL of the costs of the association. Special assessments and loans are needed by associations that refuse to increase the monthly HOA dues, and therefore have to rely on one time special assessment, or loans, to cover the cost of maintenance of the property.
I don’t think it is difficult to sense my frustrations with these boards of directors. They’re misguided, ill informed, and have no clue as to the real issues involved with FHA approval. I have to deal with them on a daily basis, no easy task. They’re dogmatic and unwilling to listen to reason. And what is really a chunk of irony is it is these same board members who sat idly by and watched countless real estate speculators and buyers purchase within their association with zero down payment and no income verification! God forbid buyers now, using an FHA loan, are fully vetted from an income, credit, and down payment standpoint. It is going to be interesting to see what types of litigation come out of the actions of these boards, because as more homeowners become better informed, they are going to look to hold these boards accountable for the erroneous decisions they make.