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Do you think this is a Stupid RULE?

By Joe Beach

Mortgage and Lending with Lending4UNow/Rapid Mortgage

April 05, 2011 08:35 AM

Recently we had a client who had a wonderful loan. Everything was going rather smoothly to refinance this condo. We were wrong. The underwriter called to say that they could not do this loan, because the FHA will not allow loans where more than 10% of the units are owned by an individual or company. In this case that would have been. 10. This LLC owns 36. Our client did not know this, nor did we, until the end.

I personally think this is unfair the the persons who indivually own their condos. What difference does it possibly make on this man's condo, if 36 are owned be 1 company? I was not aware of this, the first time we have seen it. I feel so bad for the client and anyone else who tries to refinance in that building.

Do you think this is fair practice by the FHA? To punish the other 72 people who own condos in the building?

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Karen Fiddler, Broker/Owner

Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA

Orange County & Lake Arrowhead, CA (949)510-2395

I knew about this rule....and there are others with FHA that I think seem out of place. I'm not sure what the point is. Bummer though

Apr 05, 2011 08:38 AM

Jason McDowell

Maryville, MO

That rule seems a little sketchy at best. It's too bad your client got caught up in it.

Apr 05, 2011 08:39 AM

Joe Beach

Lending4UNow/Rapid Mortgage - Springboro, OH

Seemingly unfair to many people in many condos...

Apr 05, 2011 08:43 AM

Jim Patton

Aspire Home Real Estate 209-404-0816 - Modesto, CA

Realtor - Stanislaus ,Merced, San Joaquin Counties

I had heard of something similar for condos. I know most lenders will not lend on condos if more than a certain percentage were rentals. I'm guessing this is basically the same thing.

Apr 05, 2011 08:57 AM

Doug Peveto

Tempe, AZ

I run into this rule often. Before a client makes an offer, go to this site to ensure the property qualifies.. https://entp.hud.gov/idapp/html/condlook.cfm

Apr 05, 2011 09:04 AM

I think that might be the best idea Doug. Checking to see if it is eligible first. Thanks for the link.

~Joe~

I guess I don't do enough condos, or did not have the issue before. It prevents purchases too. You would think the condo associations would put a limit, so that monopolies would not hurt their residents.

Apr 05, 2011 09:09 AM

Wallace S. Gibson, CPM

Gibson Management Group, Ltd. - Charlottesville, VA

LandlordWhisperer

You should write the LLC and offer to pay half the cost to REtitle a few of their units to DIFFERENT LLCs....then you are the HERO to the other unit owners Win-Win!!!

Apr 05, 2011 09:34 AM

Clever idea. Though I think if the residents were familiar with this rule, they would go after their condo association and the company or individual that owns the condos.

Apr 05, 2011 09:38 AM

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Joe Beach

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