Condos and Mortgages and Insurance, Oh My!

I came across this interesting article that looks at some of the changes that have followed the Surfside condo collapse in June 2021.

While the article concentrates on the Florida market, it talks about a number of issues we discuss regularly, including the impact of crumbling condo properties, mortgage financing, and changes wrought by shifting weather patterns. I was interested to see that interested parties are looking at the latter. Quote:

"Over 13.4 million properties in the United States will be newly exposed to tropical cyclones in 30 years, and Florida can expect a shift in the landfall of hurricanes from the south in cities such as Miami to more northern locations such as Jacksonville."

The Surfside Effect: Adjusting to new regulations in the aftermath of the Surfside collapse

I wish the lenders would get more involved and not lend for purchase into associations with inadequate reserves.

I'd prefer they factor in assessments when considering if the person can afford the house or condo. The top two reasons many HOAs have inadequate rserves is (1) people howl about assessments being "too high," not understanding that part of the money is to go to reserves and (2) the developers don't fund reserves from jump or educate the new board about them and why they're important. #2 probably needs a state statute requiring this because that's the only way most of the developers will do this.

Considering the Fannie Mae/Freddie Mac rules, I think the insurance companies will fall in line and compel the HOAs to do more regarding reserves. Right now, they're deciding not to cover HOAs in this or that state, but pretty soon, they'll find they're losing a lot of money in premiums. We know money talks so it would be easier for them to hedge their bet by insisting that reserve studies be done. Just as you can save on auto insurance by having alarms in the car or home insurance by installing smoke alarms on every floor in the house, perhaps insurance companies can consider some sort of discount to HOAs if they commission reserve studies on a regular schedule (e.g. every five years).

My first HOA home the lender factored in the dues. It allowed me to decide if I wanted to buy a more expensive house with what I paid in dues in a non HOA home or cheaper house with Dues. The dues were cheaper than paying for the amenities if paid on my own. I would not had a pool or lawn are independently as cheap.

If loan is not factoring in the dues then they may not know there is a HOA or your paying straight cash. Those are scenarios that HOA can slip by.