FHA Costs??

Hello we found our HOA has lost it certification due to non renewal of our HOA.

I feel our new manager is using scare tactics with us telling us its really expensive and we shouldnt pay it. Our thoughts are we should be able to make that decision without the biased of our manager. however she is not helpful.

Biggest concern is cost, we are a 70 unit building. I can not find anything online regarding costs of this.

Input?

There is nothing preventing the Association from submitting paperwork on their own.
Perhaps you can volunteer to head up that project.

There are services that will do this for a fee.

Nicole

HAve you had potential buyers that could not buy as you are not FHA approved?

Yes, only those wtih conventional loana are approved

Kerry,

Have many of your tenants 262 or older? Get me the name of their doctor.

1. Check the FHA guidelines and requirements online to be sure your Association can meet the necessary qualifications. Since the 2008 financial crisis the FHA has made certification much stricter. This is why all condos lost any previous certification and needed to be recertified.

2. If you don't qualify can you make changes to qualify ? The biggest killer is a rental percentage rate more than 50% of your total number of units. Any unit not occupied by the owner of title is considered a rental unit. Under funded reserves is another.

3. If you decide to apply check around because the cost to do the certification can vary. The reason it is costly for the recertification is because everything (and I mean everything) needs to be checked and verified. They check to be sure all your governing documents are properly recorded, your rental percentage, your reserves and projected capital expenses, recent meeting minutes etc. etc.

4. You can do it yourself but it wouldn't be easy for the first one. Require that anyone who does the application provide you with copies of all communication, completed forms, documents etc. that they provide to the FHA. The certification needs to be done every two years but reapplying is much easier especially if you have a record of the first certification. A record would make it much easier to do it yourself.

5. Talk to realtors and bank loan officers about how important FHA certification is in your area and for your association. That will help you decide if it is worth the cost and bother. A huge percentage of condo mortgages are backed by the FHA. Many banks give loans for mortgages, bundle them and sell them off to a secondary market backed by the FHA. You may have a FHA backed mortgage and not even know it. The FHA of 2015 is not the FHA of 2008 so it is important not to make assumptions without investigating what FHA approval could mean for your association.

For us it was a smart move but there are a lot of variables. It certainly can't hurt - other than the expense.

Fred makes sense, Nicole and we were fairly confident we could meet all of the criteria as we are in better shape than when we first were certified in '10 or '11.

We are thinking of charging those who want to use the FHA cert., if we get it. We aren't a 55+ building, but I'd say half of our 211 unit's owners are 62+.

Fred makes sense, Nicole and we were fairly confident we could meet all of the criteria as we are in better shape than when we first were certified in '10 or '11.

I believe FHA defines "underfunded" reserves as 10%.

We are thinking of charging those who want to use the FHA cert., if we get it. We aren't a 55+ building, but I'd say half of our 211 unit's owners are 62+.

We are FHA approved and not all realtors list the FHA certification on the MLS listing. I'm not sure some realtors even check to see if the association is certified until they have an offer where the potential buyer needs a FHA loan.

I hadn't heard about the reverse mortgage aspect but it can also be good if someone wants refinancing.

You may find this helpful although not all of it may pertain to your community. I just posted this to our Condo community Yahoo group which is run by it's members:

Why should I take 3 minutes to read this?

- -This affects you and the value of your home or investment.
- --You may not need this information today, but in future, it will be helpful.
- - An informed owner is a community's largest asset.

Condominiums
Condominium communities face rigid standards when applying for FHA approval. They must be fiscally sound, be majority owner-occupied, have a low delinquency in dues payments, be well-maintained and have reserve funds for emergencies.

There has been some discussion here and outside the group about whose fault it is that CV2 is not FHA approved. There are fingers being pointed to many who were not responsible for “allowing” this to happen. Every owner needs to turn that finger around and point it at themselves.

Some FHA facts
:
- - FHA does not loan money. It is a federal program that guarantees the money the bank is loaning for the mortgage.
- - FHA has less stringent qualifications when applying for an FHA loan than a conventional loan has.
- - FHA loans traditionally carry lower interest rates and helpfully lower income to debt ratios allowing someone to qualify for an FHA loan.
- - FHA loans cannot be used to purchase investment property. The home must be owner occupied for a least one year.
- - Multiple FHA loans cannot be issued to the same person as they expect the property to remain owner occupied.
- - Prior to February 2010, a person could qualify for a “spot approval” within a community.
o The community would still have to meet the criteria of renter to owner ratios and delinquencies.
- -Beginning in February 2010, the entire community needs FHA approval to qualify. The application process is as follows:
o The community would have to meet the renter to owner ratio and delinquency ratio, along with other criteria.
o The community would have to apply for re-certification every 2 years.
o The cost of approval and re-certification is $850.00 paid by the community.

So, with that information, why should we be pointing our fingers to ourselves as owners?

Because of the 144 units in CV2, only a very small handful of people take an active interest by going to meetings, volunteering, and educating themselves to protect their own investment. You can’t blame the management company, they work under the direction of the Board and their duties are limited to maintaining the finances of the community. You can’t blame the Board whom you’ve never formally elected by not attending an Annual Meeting when elections were held. So the only one we can blame is ourselves by not exercising our duty and obligation to attend meetings and vote.

I was in attendance at my first annual meeting in 2004. The rental issue was brought up. In fact, the owner of 8 units was in agreement to change the By-laws to limit the number of rental units. Attendance at that meeting was probably 10.

It would be very difficult to change the rental ratio at this point in time, but if we improved the community and raised its value, it will encourage investors to update their units so they could charge higher rents and get better tenants and therefore, bring more value to the entire community.

Why am I posting this?

- - Because, unless the owners are more involved, CV2 will continue to decay because of lack of leadership and owner interest.
- - Because, I care. I, like many, have chosen CV2 to retire in. We live in one of the most expensive zip codes in Charlotte. We have SouthPark to the north and Ballantyne to the South. We are a working class, retirement, neighborhood with many nearby amenities very few areas of Charlotte can compete with.
- -Because, maybe, with owner support, we can turn this all around and all benefit from the changes.

Good article Pat.

Are you on the Board or volunteered to serve on the Board?

I ask because that's the easiest way things can be changed.

I agree - great article Pat.

Thanks for pointing out that the FHA doesn't make loans but backs the loans. I didn't really make that clear in my post.

I don't know about other states, but in Ohio the BOD can amend the Declaration & Bylaws to meet the 50% rental limit required by the FHA without owner approval.

House Bill 135: The Board may amend the Declaration without a vote of the owners in any manner necessary for the following purposes:

a. To meet the requirements of institutional mortgagees, FNMA, FHLMC, FHA or VA;

b. To meet the requirements of insurance underwriters;

Having your community FHA certified to increase sales and property values is not getting into the mortgage business. As Pat pointed out, since 2010 the community as a whole needs to be approved not just the individual applying for the loan.

Once again, it is a good idea to talk to several realtors and loan officers to learn more about how important the FHA certification might be for your particular community.