Wednesday, September 7, 2011

FHA and HUD - Are the Fed's regulations contributing to the economic stagnation?

The real estate Gods have smiled upon you. Your asking price is accepted by a buyer. They have accepted your price and better yet - they are a qualified buyer. All things seem well and life is good. However, you receive a call from your agent and they inform you that your condominium does not meet with HUD's requirements for FHA financing? Now what?

Unfortunately, this scenario is becoming all too real. Numerous Homeowners Associations (HOA's) throughout the United States are being unfairly penalized due to the actions and/or inaction's of others.  Two of the requirements that are problematic have to do with the questions concerning Litigation and the 15% Assessment Arrears issue. What constitutes litigation? When HUD refers to litigation, does it mean civil or criminal? What about small claims? What amount would seem reasonable? No one knows. The HUD checklist merely asks if there is any on-going litigation.

Thus, one might have a contractor suing the association for some unpaid bill and this would appear in a records search. What if the amount is for $150.00? Who is screwed now? In this case, it would be both the buyer and the seller.  All because of a decision or indecision by a Board of Directors. Clearly, HUD should define what constitutes litigation. After all, if it is some form of  legal litigation seeking "Injunctive" (non-monetary) relief, why should the applicant be penalized?

Then there is the issue of monthly assessments. What if a person is merely 31 days past due for a monthly assessment of $85.00? Should this circumstance affect the application and certification process?  Most Homeowner Associations (HOA's) governing documents limit the type of Collection  Procedures that can be implemented when it comes to a thirty (30) day window. Most Boards of Directors and/or Managing Agents merely send the owner a Late Notice. Most (if not all) do not take formal collection action on assessments until 90 days.

So now you have it. A person is in arrears by one day and they could be disqualified. If you are a small condo or Homeowner association with less units, say ten (10) , then if two(2) people are in arrears by one day you can be denied. Now that is taking the sublime and sending it to the ridiculous. Why? Because if you reside in a ten (10) unit community and two (2) people are more than thirty (30) days in arrears, even by one day, you can be declined.

I wonder just how many qualified home buyers are choosing to rent because they (or the HOA) were unable to receive FHA certification? While I do not know the answer, the mere absurdity of the process tells me that there must be more than we would ever imagine. The real question is - Who were the brainiacs that came up with this fur ball. And people wonder why our economy is slogging along.