Condo owner & non-owner occupancy ratio opinions?

Hard to judge what is, is not, real in this area. We recently had to obtain the signature of 75% of the "owners", not renters, to qualify for a North Carolina Program,...took months to track down owners and get them to sign...one thing you need to do is keep track of the owners and how to reach them. We have a 150+ HOA Community so it was a big job.

You will have a tough time trying to limit rentals if it's not already in your By-Laws, or whatever your governing documents are labled. A precedent has been set.

We had some owners who wanted to add (55+ Community) to our HOA, easy to do (75% of the homes have one resident over 55) but really useless since we could not require owners to only sell to buyers who had one resident over 55) to maintain that percentage since it require amending the By-Laws and in today's housing market you would never achieve approval. That applies to limiting rentals as well...who is going to agree to limit his/her options when other residents did not have too...?

Good Luck

There is an actual form for this information. The percentage of owner occupied units versus rental does matter. It matters in the way that it effects the type and interest rates of loan programs offered in your area/HOA. Loans like FHA, Fannie Mae, or Freddie Mac use this form to evaluate or appraise the value of the HOA. One of the section of questions does ask the number of units that are used as rental among other questions. There are about 25 altogether and usually filled out by a HOA officer prior to loan closing depending on the type. You may never know this form is being signed at your closing. I've filled out this form on a few homes but ONLY dealt with the mortgage company/bank. Never saw the potential buyer.

The form is a HUD form. (Housing of Urban Development). I believe it's federal. It is NOT required for all types of loans. You may find a copy on the FHA, Fannie Mae or Freddie Mac website. Just look for "Home Appraisal" forms. It's basically the same form used when you get your home appraised.

It depends on where you live on limiting rental. California is the only one that has passed a rule in the past year that has any teeth in limiting rentals in a HOA. Since a HOA does NOT actually own the homes, it can't interfere with the contract of the homes. So limiting rental property is a good idea but practice legally is a different story...

I appreciate your reply, but searching Fannie Mae for "Home Appraisal" yields (to start with) 200+ hits. Even if I could find one that fits our condo situation, I don't think it is what we need. No one is disputing that lenders weigh owner occupancy. What is in question is the % of rentals that lenders consider problematic - and to get an authoritative statement in print that we can present to our members. If we just end up with fudgy opinions, we will never convince 75% of our members to amend our Declaration.

What interests me about your post is the news that HOA presidents are being asked to complete these forms by lenders. (?) Are they *required* to do this? How complicated is the form? In our HOA, there doesn't even appear to be agreement on how many units are actually non-owner occupied... so this really makes me wonder about accuracy of collecting data this way... and from *volunteer* board members. Sounds strange that so serious a matter would depend on the input of non-professionals.

Frank,

Lenders typically base some of their criteria on what Fannie/Freddie requires to purchase the note. Per HUD The Condominium Project Approval and Processing Guide and the HUD Mortgagee Letter: 2012-18, rentals should be limited to 50%. This was recently changed to 50% because it was hurting sales. If I recall correctly, the initial number was 30%.

The problem with an Association limiting rentals (vs. banning them completely) is all the conditions that the Association needs to address prior to implementing such a plan. These would include:

1) Will the Covenants need to be amended (typically they do)?
2) How will the Association track the rentals?
3) How will the Association rotate the rentals if more than the maximum allowed owners want to rent?
4) Will there be a hardship clause (typically recommended)?
5) How will hardship be defined (as failure to clearly define it leaves it open to interpretation which may bring legal challenges)?
6) Penalty if someone rents it anyway?
7) Will the rule be grandfathered on existing rentals?
8) If grandfathered, how does that affect the rotation or hardship?

There have been many discussions about rental restrictions on this forum. I would suggest you take a look at them to see what issues the Association will need to deal with. Here are just a few:

Subject: Rental Restriction Amendment - Hardship clause
Subject: Rental Restrictions - HOA Meeting Communication
Subject: Determining which units are rental units once restriction is in place

To read more, just click the search icon in the upper right corner of this page and search for "rental restrictions"

The best restriction I heard of was not a restriction in the numbers but required a unit/property to be owner occupied for the first two years prior to renting. This was an amendment to the CC&Rs and applied to all homes purchased from the date of the amendment forward.

If I recall the post properly, this had huge support from the membership as it minimized investors (as they couldn't rent it for two years after they bought the property) and didn't affect existing members or rentals.

Hope this helps,

Tim

You dont get it. I dont want to know about any renters. That way I can fill out the condo resale certificate truthfully and state to my knowledge there is 100% owner occupancy.

I have less then 20 posts on HOATALK but I have to reply to Steve who has over 1700.

You cannot sign a form saying that there is 100% owner occupied homes if you don't know that as a fact. You can say that your 100% sure that you don't know how many units are owner occupied.

I suggest Steve takes some time off from posting bad advice and uses that time to take a course in ethics....

Brad, I said "generally speaking". I have over 20 years experience living full time in a 6,400 property Assn. Almost all of our non-compliance violations involve rental properties, many having 6 to 8 cars parked all over on an ongoing basis. At each hearing I would ask our Compliance Inspector if it was a rental properyty after looking first hand at it. With very few exceptions they were rentals, just a fact. We have copies of the deeds for all properties.

As mentioned earlier, unless your GD's have rental restrictions there is not much you can do about it, anyway, except move.

Paul T

but must admit I am a complete novice re mortgage issues and am quite uncertain as to how HUD, FHA, Fannie Mae & Freddie Mac interface with each other and customers and what relevance they might have on our prospective buyers."

Frank,

I too am a novice on this stuff. However this is what I understand.

Most mortgages are sold multiple times over the life of the loan so the lender may recoup their money quicker, make a little profit and clear the risk (no matter how slight) from their books. The largest buyer of these notes is Fannie and Freddie.

When the housing bubble burst (I really hate that terminology) new guidelines were adopted to limit the risk to Fanny & Freddie. Basically, if a loan conforms to those guidelines, it's a high probability that Fanny & Freddie will purchase the note. If the loan doesn't conform to those guidelines, the lender must find someone else to buy the note from them (which cuts into the profit). Therefore, the most favorable rates are to those loans that conform to the guidelines.

The previous guidelines mainly looked at just the buyer. The post bubble guidelines are now taking a look at the financial situation of the Association and other criteria that could risk the buyer to have to pay more in assessments, special assessments, repairs, etc. which could prevent them from making a mortgage payment on time.

Hope this helps,

Tim

I was not going to get into this, basically off topic side-road, but my original question was "Can anyone point me to something of substance or authoritative on the subject?" I was asking for leads to a "lender or professional group" that has put in writing info about recommended ratio of investment units in a condo. Maybe I didn't make the issue clear enough. But, for the record:
1. Steve did not respond to my question.
2. I would never follow the "don't ask" strategy(?) offered above. Nor would I suggest it to anyone. Thanks, but no thanks.
3. A lot of space has been wasted on this "creative" approach.
4. I'd appreciate it if we could get back to my original question.
Sorry if I am stepping on toes.

OK, glad to have this clarified. Thanks. So the issue of whether an HOA could add "rental" type restrictions that might effect a current owner/investor was not addressed, right?

This might not be a big problem for our group as I think they would have to grandfather existing units to get an amendment passed.

It helps a lot. Thanks. Frank

John,

I wish we had that restriction (and no overnight parking on the streets). I suggest you go for the one year or more limit if at all possible. I would think that having the six months restriction already in place would help. Nothing stays the same forever, if you get my drift. You have been lucky so far.

Paul T

I agree. Don't hate the player, hate the game.

Bank wants to know how many rentals there are, let them do it themselves.

Frank,

My posting where I cited the forms include links to those forms (blue type). Just click on the link.

In the Condominium Project Approval and Processing Guide the info is on page 43
In the Mortgagee Letter it's on page 6

Performing a simple google search provided these additional links about the changes:

New FHA condo rules may hinder mortgages 2009 article on bankrate.com
Understanding FHA Loans article on Realtor.com
Mortgage Matters FHA 2012 Article by CAI (Community Associations Institute)
FHA eases burdensome condo financing rules 2012 Article in Los Angeles Times
FHA Condo Loan Rules Article on FHA.com

Revised condo rules should make it easier to finance mortgages through FHA 2012 Article in The Washington Post

Shelia

You Property Managers list might not even be valid. As an example John Smith of Small Town is listed as the owner of Unit 124 but the resident if Unit 124 is Mary Jones.

Could it be Mary Smith Jones, the daughter of John Smith? Mary who was born there, brought up there, and when John Smith moved to Small Town for job, his adult daughter Mary Smith Jones kept living there? This is not a rental.

Steve/Larry,

Thank you for the reply.

I just want to say that sooner or later some sharp eyed bank officer, HUD representative, etc. will see that 100% number, look at other HOA's in the area and wonder what's so special about that place that gives it a 100% owner occupancy rate? They may come knocking on your door....

Your also doing a diservice to the residents that live there because they believe their homes are of a certain value when there not.

As far as filling out paperwork...isn't that what your agreed to do when you became a board member?....it comes with the job.

I spent 30+ years in pharmaceutical research, spent lots of time dealing with the FDA and European and Asian regulatory groups etc. so I am very familiar with government paperwork and the time it takes and how frustrating it can be.

Ed

and another point..... if the bank's dont verify the information, why include it at all? Without verification, my number means nothing.

Frank

When the HOA sends the dues bill to John Smith, Unit 214 and we get a check back no matter whom the check is from, I would say the unit is owner occupied and sign my name to any document based on that alone.

What the heck do we know.......LOL

Larry

Well said.