What happens when condo owners fall behind on their dues/assessments? CONDO MORTGAGES GET HARD TO GET!

Mortgage and Lending with Be My Neighbor Mortgage 206672

I'm often asked, why is it so difficult to get a loan on a condo?  Well it is simple if the complex is perfect, has zero issues, a certain ratio of owner/tenant occupied and is also approved by FHA.  Well, in these times, it is tough for all condo complexes to meet this criteria.  Sometimes even harder to get the info from the management companies they hire to run the place.  See great blog with further info below.

Original content by Sonny Landau

That, in turn, affects everyone in the development, not just homeowners in financial straits.

"When someone doesn't pay assessments of the community, they're picking the pockets of every one of their neighbors," said Andrew Fortin, vice president of government and public affairs for the Community Associations Institute.

The current problems only exacerbate what's been an issue for years, some say. Many condo associations aren't prepared for major maintenance jobs due to ill-funded reserves and insufficient planning, said Evan McKenzie, a political science professor at the University of Illinois at Chicago, who has written about homeowner associations.

"This is a very troubled housing sector right now," he said.

To compensate for lost income, some associations are hiking assessments on all residents, said Frank Rathbun, vice president of communications and marketing for the CAI. Many are also cutting back on spending, which could mean anything from deferring capital improvements to skimping on landscaping projects.

Some are employing tougher tactics to collect dues from homeowners who are behind on payments, more frequently slapping liens on properties and in some cases foreclosing on those who are delinquent. Fortin said that usually the threat of a lien is enough to get most people to make an effort to become current on their dues.

But getting tough about collections is easier for professionally managed associations. Many smaller buildings are managed by a board comprised solely of residents, and that can get awkward because they have to enforce rules on neighbors who might be dealing, say, with a job loss, said Richard L. Thompson, president of Regenesis, a homeowner association management consulting company.

Meanwhile, windows and roofs may need to be replaced or streets repaved. If there's no money, the projects won't get done.

Lenders shun some buildings

It's also getting tougher for associations to get a loan for the extra funds they need, when drawing extra money from members isn't enough, McKenzie said.

And there's another consequence of dues-dodging neighbors: Lenders are less likely to approve a refinance loan for anyone in the building, or a purchase loan for prospective buyers, if a significant number of owners are past due on their assessments.

If dues are 30 or more days delinquent for more than 15% of the units in a condo building, the entire building earns a "non-warrantable designation," and borrowers are unable to obtain a typical mortgage loan, said Dan Green, a loan officer with Waterstone Mortgage, in Cincinnati.

"The guideline applies to all government-backed loans -- from FHA, Fannie or Freddie -- and it applies to every condo in every market," Green said in an email.


BOTTOM LINE --- it get harder and harder to make a living!  Have you seen the large number of condos that are seeking buyers but lenders aren't interested particularly in new condo conversions!


St Louis Painter

Posted by

Melissa Anderson
Texas Loan Officer

210-849-9030 cell

NMLS 206672

Amcap Mortgage

email: yourtexaslender@gmail.com



Comments (5)

Bryan Watkins
LRA Real Estate Group - Mesa, AZ

Melissa, we tell our short sellers to be sure and keep paying their HOA dues. I am sure you do the same.

Sep 09, 2010 03:59 PM
Melissa Anderson
Be My Neighbor Mortgage - San Antonio, TX
Your Texas Lender

Bryan- I'm a direct lender & when I am working with a Realtor who has a buyer in distress I always encourage them to do so.

Unfortunately, most folks stop paying the dues, credit cards etc. before they stop making the actual mortgage payment or the cell phone bill.


Sep 09, 2010 04:03 PM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA

I don't take units for rental management in HOAs that are self-managed because of their lack of knowldge and experience which effect ALL of the unit owners.  HOA self-management is EXPENSIVE!!

Sep 09, 2010 11:28 PM
Michael Delaware
North Sky Realty LLC - Battle Creek, MI

It kind of represents a microcosm of our society, doesn't it?  It is felt by the other condo owners in this case, but with single family houses, it is felt by all of us as tax payers eventually when someone defaults.  I think the next two years, we are facing some hard times in a lot of local municipalities from this very same condition.

Sep 11, 2010 02:32 AM
Shirley Parks
Sands Realty 210-414-0966 - San Antonio, TX
Broker, 210-414-0966, San Antonio TX Real Estate

I'm glad you reblogged this, Melissa.  Good information here for condo agents as well as for buyers.

Sep 14, 2010 12:51 PM