An unwelcome surprise has visited many common interest communities in the past few years: their FHA mortgage approval certification has lapsed.
Once upon a time pretty much every CIC was approved for FHA financing. FHA is often preferred to Conventional mortgage in that the qualifying ratios are more generous and the down payment requirement is substantially lower. This allows more people to qualify for a home mortgage.
However, in the wake of the bursting of the real estate bubble around 2007, the FHA revamped its requirements for CICs , creating more onerous burdens if they wanted to be certified for FHA financing. FHA also took away “spot approval” in which individual units could be FHA approved without the entire association being certified.
This has created some tension between individual homeowners and their associations, as it can pit the needs and wants of the one against those of the community. As management, I honestly could argue either way on this.
The PROS: FHA financing allows for a larger pool of qualified buyers. This can help maintain or improve housing value and even prevent units from going into foreclosure if a seller needs all the buyers s/he can find. FHA mortgagors are often first-time buyers and owner-occupants.
The CONS: The new requirements create a burden to the association in terms of dollars and time (i.e. re-certification must now be done bi-annually and usually someone must be paid to oversee this). FHA financing allows buyers without much scratch to buy into the community. Are they a job loss or illness away from foreclosure?
Every association is different and I have found no “right” way to proceed—even with regard to discussing the topic at all. Some associations yawn as this is no concern for them while others have homeowners up in arms as it’s claimed the association is restricting their ability to sell.
Whenever the topic comes up for discussion, I’ve found it valuable to start with talk of pros and cons. Is this a good thing for the association? It also helps to segue into talk about talk. What is this association’s take on its obligation of communication to homeowners? What are homeowner’s obligations to communicate with the association?
An open dialogue, folks. That is what I preach because it’s best for the community.
Merry Christmas and Happy New Year.
Susan and I send you our best in this holiday season.