How Do Delinquent Homeowners Association (HOA) Dues Affect FHA Mortgages?
As part of the FHA condo project approval process, various aspect of the Home Owner's Association must be evaluated. One such aspect is the delinquency rate of the current owners. FHA guidelines require that no more than 15% of the total units can be in arrears on their condominium association fee payments. Arrears is defined as more than 30 days past due. This does not include late fees or other administrative expenses. The 15% includes all units (occupied, investor, bank-owned, vacant).
Should the delinquency percentage exceed 15%, exception requests may only be considered on a case-by-case basis. The mortgage lender can submit a request to the jurisdictional HOC for the property. No exception requests can be processed by the mortgage lender under the DELRAP option. Of course, FHA does reserve the right to reject any exception request received.
In order to be considered for an exception request, the following requirements must be met:
- No more than 20% of the total units can be in arrears (more than 30 days past due).
- The HOA provides a report for the past six months that reflects the history of unpaid assessments.
- The HOA current reserve fund balance and current operating results (documented HOA Balance Sheet and Income/Expense financial statements dated less than 90 days at the time of submission) evidences excess available funds in the amount of the outstanding arrearage.
- A review of the HOA financial statements and verification of the reserve account balance reveals that the HOA has sufficiently accounted for bad debt and arrearages.
- A current reserve study that is no greater than 24 months old supports the sufficiency of the current HOA assessments to meet the project component replacement needs.
- The HOA provides evidence of actions to collect the unpaid arrearages, including legal action, execution of payment plans, or other similar efforts.
- The exception terminates with the expiration of the current condominium project approval.
HOA Dues delinquencies is just one of the many aspects of the FHA condo project approval process.