Any help much apprreciated/FHA approval

As far as the transfer goes, your CC&R's should state the condition under which the developer was to turn over control to the owners. Typically, when he sells all units he is out of the picture. A copy of the CC&R's and deeds for each unit would prove that the developer is no longer in control. (This is the first time I have ever heard of some sort of document evidencing transfer of control. Is such a document common?)

Your CC&R's should state whether your association was supposed to be incorporated and also state the name of the association. If your association is incorporated, then the articles of incorporation should have been filed with whatever state agency regulates corporations. Articles of incorporation will vary from state to state but at a minimum will state whether the corporation is a non-profit, state its name, its general purpose, who incorporated it and when.

You will also need to verify that your association is in good standing. In AZ, for example, every corporation is required to file an annual report. Failure to file will lead to administrative dissolution.

If all five owners sign a statement agreeing to be self-managed it ought to satisfy the pencil-pushers. You won't know until you do it. Normally a board of directors could sign off on this, but with just five units getting everyone's approval should be just as good.

Nicole,

You might check the records where deeds are filed to see if the developer executed an assignment of his rights to the owners and/or their association. This would be the formal notice that the developer surrendered his rights, but from what I have seen it is rarely done. Most developers just walk away when the owners take over.

Since the subject of FHA approval has come up – For anyone interested:

The U.S. Department of Housing and Urban Development (“HUD”) has published FAQs on the latest revisions to the condominium approval guidelines that were just published in HUD Mortgagee Letter 2012-18, dated September 13, 2012.

These latest revisions will remain in effect until August 31, 2014 – unless further extended by the Federal Housing Administration (“FHA”).

(I do not know how applicable the guidelines are to NicoleC’s “very small” Association).

http://portal.hud.gov/hudportal/documents/huddoc?id=sf_faqs1218.pdf

http://portal.hud.gov/hudportal/documents/huddoc?id=12-18ml.pdf

There is a form that HUD or FHA sends out for signage whenever they approve one of their loans. It is similar to an appraisal forms. Which it is a basic appraisal of the HOA itself. The form has about 25 questions on it. They do ask things like are you "Fee Simple", income of the HOA, collection rates, any lawsuits pending, and general health of the HOA. This form is used by many mortgage companies in evaluating what type of loan programs they will offer including FHA.

Now a days getting loans is incredibly harder and require much more documentation. Having the ability for people to qualify for FHA loans just opens up the doors to many more potential buyers. It doesn't mean that NOT have FHA approval effects values of your homes. It just opens up more potential for new owners who qualify under the FHA terms. There are still other mortgage options like Fanny Mae and Freddie Mac that can be used.

Your CC&R's should be on file at your local courthouse if they are on file. It may be time for you all to review them and make changes if necessary. Just for good updating purposes and future needs. Not sure if it will help you with getting the FHA approval you all seek but it is good to update them every 5 to 10 years to reflect better what the HOA needs are.

NicoleC,

Are you trying to help someone, or perhaps your self, refinance a mortgage, or are you trying to help a possible buyer get a mortgage?

Nicole,

You mentioned that you are dealing with a “rep”. Who is that person – not their name – but who do they represent? It is someone associated with HUD, or perhaps with a mortgage lending institution?

In any case, have you asked the “rep” where in the requirements does it state that the Association has to be incorporated?

Larry,

Based on my experience, I have found that the person asking may not know when questioned – admits they do not - and then transfers me to someone “higher up”.

That is why I suggested that Nicole question the requirement, and ask for the wording of the requirement, and where it is in the "approval procedures”, what page it is on, etc.