Sunday, March 25, 2012

Few condo associations certified for FHA loans - Lansner on Real Estate : The Orange County Register

Few condo associations certified for FHA loans - Lansner on Real Estate : The Orange County Register
" William Sasser is chairman and CEO of The Management Trust in Tustin, which manages more than 1,600 homeowner associations in California and five other Western states. In Southern California, the firm does business as TransPacific Management. Sasser says that as of September, fewer than 10% of U.S. condo associations were FHA certified so that members could get FHA loans."
Thanks to Fred Pilot for this link. This is part of what one law professor called the "death spiral" of many associations.


Fred Pilot said...

If only 10 percent of the condo market can get FHA loans, it's the death spiral of condos as a whole unless reversed. I suspect the FHA is discovering the investment risk of condos is not well aligned with the risk tolerance of the FHA itself and the first time buyers who rely on FHA loans.

Anonymous said...

Expect a lot of lobbying from the trade groups that siphon money out of homeowners who are involuntary members these corporations. When they suck out all the life essence (and equity) of one member, the industry needs another one to take his/her place - and that isn't going to happen on a large scale without government subsidies.

The HOA Lobby said...

We oppose government interference with H.O.A.s.

But we want the government to subsidize them.

Tyler Berding said...

The average condo association in California has only 50% of the cash in its reserve account that its reserve study requires usually due to unrealistically low assessments. And that's in good times. Now, as the article states, there is widespread borrowing from reserves just to pay ordinary expenses, associations will never be able to accumulate the balances in their reserves required by the FHA for certification. We first predicted the condo "death spiral" 15 years ago, but this recession has accelerated it's effects ten-fold. If the FHA won't lend because delinquencies are up and reserve balances are low, what buyer would be interested? If regular maintenance is being kicked down the road because of lack of funding, what happens when serious hidden damage is discovered? The future does not look promising, especially for older condo associations.