Q: I am hoping you can help us. One of my neighbors asked if I could help him out in regard to getting Federal Housing Administration approval for our community. He is trying to get a reverse mortgage, and when he approached our board about it, he was told no, for the following reasons:
■ The management company said we cannot do this.
■ Mortgage experts tell us that having access to FHA mortgages in a community like ours is really not an advantage because virtually everyone does a conventional loan.
■ The cost seems high.
My first concerns are:
When I asked the management company about getting FHA approval, the CEO informed me that this is “not something that the board does. It is an individual owner’s responsibility. We do not handle any thing as this in our office.”
I question the mortgage “experts” since if you are not a veteran, the only mortgage you can get is a conventional one.
I feel like I have to call BS on the management company. I think it is their responsibility to do what the board requests of them. Am I correct on this?
When our community was built in 1997, we did have Veterans Affairs and FHA approval. I know VA approval last forever, but the FHA was never renewed.
Any insight you can provide will be much appreciated!
A: To obtain FHA approval does require some paperwork. The board would have to place this issue on an agenda and approve it, instructing the management company to pursue the action item.
An individual homeowner cannot obtain a FHA loan unless her association has met the FHA requirements.
Here are some of the FHA requirements for an association:
■ No more than 50 percent of the property can be used as commercial space.
■ No more than 15 percent of the units can be in the arrears in their assessments for more than 60 days.
■ No individual investor or entity may own up to 50 percent of the total units if at least 50 percent of the total units are owner-occupied as principal residences.
■ No more than 50 percent of the units can be investor/owner rentals.
■ At least 10 percent of the budgeted income must go toward a reserve account.
■ Adequate reserves are required to fund capital repairs and replacements for the next two years as determined by a recent reserve study.
■ If you live in a condominium, the master or blanket insurance policy must be 100 percent of the replacement cost.
■ The association must have general liability of the common elements and public ways, fidelity bond (must be three months aggregate assessments of all units) and flood insurance (if within 100-year flood plain).
■ There are a number of leasing restrictions with the most important that leases must be 30 days or state no transient rentals.
Providing homeowners with the ability to obtain FHA financing and refinancing is a worthwhile service. There are many advantages, and FHA loans are very competitive as to requirements, such as loan-to-value, which helps first-time homebuyers.
There are many banks that can help this association, or the board or management company can contact the local U.S. Department of Housing and Urban Development at 702-366-2100.
Barbara Holland is a certified property manager, broker and supervisory certified association manager. Questions may be sent to firstname.lastname@example.org.