Florida Condo & HOA Legal Blog : Florida Condo Lawyer & Attorney : Becker & Poliakoff Law Firm : Condominium & HOA Law Blog

Struggling with mortgage payments?  If so, look for information from Fannie Mae before giving up.  The Fannie Mae "Know Your Options" campaign uses TV spots to reach struggling borrowers, encouraging them to visit KnowYourOptions.com and call a toll-free phone number. Fannie Mae volunteers will use the information provided by callers to document and route their cases to Fannie's Mortgage Help Centers or other resources for assistance.

The site contains useful information for homeowners whether you want to stay in your home or not. The site explains options regarding:

1. Refinance
2. Repayment Plan
3. Forbearance
4. Modification
5. Deed-for-LeaseTM
6. Military Forbearance
    

Short sales are addressed.  Fannie explains that a Short Sale is also known as a pre-foreclosure sale.  Selling 'short' means selling your home for less than the balance remaining on the mortgage.  Users can learn whether they qualify for the Home Affordable Foreclosure Alternatives Program (HAFA) which offers short sale and DIL options or other government programs.  Short sales are generally beneficial to community associations.  Past due payments add to association coffers and new homeowners bring life back in to the community.

The site also warns distressed homeowners about possible scams.  HUD-approved housing counseling agencies are available to help you negotiate with your lender or loan servicer. They do NOT charge a fee.  Users are encouraged to call 1-888-995-HOPE (4673) for free housing counseling before signing any documents, diverting mortgage payments or paying for credit counseling services.
 

Community associations suffer when their homeowners are struggling financially.  Not only do assessments fall by the wayside, but there are other impacts. Properties are usually not maintained as well i.e. the lawns grow taller and develop weeds, shrubs and plantings grow out of control (in some cases reducing visibility at intersections and creating 'dark' spots) and roofs become black with mold, all of which decrease property values and home enjoyment.   Hopefully your homeowners can take advantage of some of the options available to improve their financial situation and then pay their assessments!

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Over 40% of the Home Loans Issued in Two Major Florida Cities in February are Government-Insured FHA Loans. 

The marketability of the homes in your community is highly dependent upon the availability of mortgage financing.  We've included several posts on this site regarding purchase money financing issues over the past 2 years, including reporting on the changes to federal underwriting guidelines. Since mortgage financing (or lack thereof) severely impacts community association operations, Community Associations Institute (CAI) announced it is "stepping up its Congressional and federal regulatory advocacy on behalf of American homeowners, home buyers and common-interest communities."   CAI issued a statement on behalf of its 30,000 members that included the following quote:

"The stakes for homeowners, home buyers and communities are enormous,” says CAI Chief Executive Officer Thomas M. Skiba, CAE. “Rules being developed today may likely govern mortgages for the next several decades. If you live in an association or work in the community association industry, you need to understand the magnitude of these issues, keep abreast of the latest developments and weigh in when such opportunities are available.”  

You can learn more about CAI's new initiative at Mortgage Matters.

The mortgage crisis is also evident by comparing the percentages of FHA backed home loans.  FHA project approval has proven to be a significant factor in home sales. DataQuick Information Systems reports the following increases in Florida:

The future of GSE (Government Sponsored Enterprise) financing is also up-in-the air.  However, Fannie Mae announced an incentive program it says will help stabilize communities.  Purchasers of Fannie-Mae owned HomePath properties are eligible for financial assistance to help pay up to 3.5% of the closing costs.  Fannie Mae-owned HomePath properties are listed on HomePath.com and most listings include detailed property descriptions, photographs, information about local schools and more.

Proactive community leaders have taken steps to ensure their communities are approved for favorable purchase financing.  You may want to discuss project approval or certification with your community association attorney.

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The United States Department of Housing and Urban Development (“HUD”) announced recertification deadlines for condominium projects that had received approval for FHA-backed mortgage insurance prior to October 1, 2008.    

In the past many association leaders viewed FHA financing negatively.  The decline in real estate values and banking crisis has eliminated many options from conventional lenders.  Lenders will not finance properties if the loan is not acceptable to the secondary market (Fannie Mae, Freddie Mac and the like).   FHA requires a minimum down payment of  only 3.5%, but it also requires proof of affordability and satisfactory credit scores. FHA guidelines limit housing costs to 31% of income which means a new buyer must earn 3 times the monthly mortgage and association dues.

Whether you think the economy is on its way to recovery, or gearing up for a double dip recession, having your community approved as a FHA/Fannie Mae eligible project is one way to increase the marketability of units in your condominium.

Fannie Mae is a government-sponsored enterprise (GSE) chartered by Congress with a stated mission to provide liquidity, stability and affordability to the U.S. housing and mortgage markets and to increase the amount of funds available in order to make homeownership and rental housing more available and affordable. Fannie Mae works with mortgage bankers, brokers and other primary mortgage market partners to help ensure they have funds to lend to home buyers at affordable rates.

If your unit owners are experiencing difficulty in selling or refinancing their units, and your community is not a Fannie Mae or FHA approved project, you may want to investigate whether it would be worthwhile for your project to become approved. Fannie Mae or FHA approval just may bring more buyers to the table for those units “for sale” because financing will be more readily available. Additionally, the increased marketability of those units currently for sale in a Fannie Mae or FHA approved project not only helps the current sellers, but also serves to increase the value of all units in the condominium. This will not only help owners currently looking to sell or refinance, but will also help those unit owners who may wish to sell or refinance their units in the future.
 

While there are fees associated with the application for Fannie Mae or FHA project approval and the securing of an attorney review letter in support of same, the unit owners of your condominium, whether or not their units are on the market at the current time, might agree that such costs and fees are worthwhile to assist in the free flow of funds to be lent to homebuyers in your condominium at affordable rates.

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If so you need to become aware of the Federal Housing Finance Agency's plan to prohibit Fannie Mae, Freddie Mac and other Federal Home Loan Banks from purchasing mortgages for properties in communities where the covenants contain transfer fees.

If you read the newspapers (or watch news on the internet) you already know that mortgage rates are lower than ever before.  Wouldn't it be great to refinance at 4.5% (3.8% for 15 year conventional loans)?  Think about how monthly savings would help your cash flow needs. For owners trying to sell properties, lower mortgage rates usually mean higher sales prices.  For those looking to buy a home, lower rates mean more buying power and/or more cash flow to meet other needs, such as community assessments.

In order to qualify for those low rates, the mortgage must be backed by a government or quasi-government entity.  FHA/VA loans have great rates and very low down payment requirements (usually 3%).  The government guarantees those loans so the lender is protected in the event of default.  Fannie Mae, Freddie Mac and other GSEs (government sponsored enterprises) buy loans from lenders - the lender is able to offer the low rate since it sells the loan (and the risk) to one of these entities.

The Federal Housing Financing Agency (FHFA) is a government agency created to regulate and oversee GSEs.  One of its primary purposes is to make sure the GSEs operate in a "safe and sound manner" - so it reviews business practices on the part of the GSEs.  It recently proposed a new regulation that, if adopted, would prohibit buying loans for properties in communities where the covenants contain a private transfer fee.  

What is a private transfer fee?  Well, it could be many things.  Community Associations Institute (CAI) defined this term as "any fee or payment required at time of sale of a property by a deed or covenant restriction."   Typical community association fees include:

• Screening/Background investigation fees;
• Estoppel fees;
• Capital Improvement assessments;
• Mandatory Country Club initiation fees and the like.

While the regulation is not intended to limit mortgages as a result of these types of fees, it could have that impact if adopted.  In fact, Florida law specifically excludes certain typical community association fees from the definition of transfer fees in Section 689.28, Florida Statutes. 

CAI has created a survey for community leaders and managers.  It will compile the results and use them in an attempt to convince FHFA not to limit mortgage options for properties in community associations.  If distressed owners cannot sell their units/lots/homes because buyers cannot obtain mortgages, community associations will continue to suffer.

Please take a look at this survey.  Click HERE for the Survey.

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A housing conference is taking place today in Washington, D.C., where industry leaders and government officials are discussing the future (if any) of Fannie Mae, Freddie Mac and other Government Sponsored Enterprises (GSE) that offer mortgages.

These entities (Fannie, Freddie, etc.) are backed by the U.S. government.  Government backing lowers lending costs which translates to lower mortgage rates for consumers.  In theory, lowering mortgage rates and providing consumers with more access to capital encourages home ownership, increases home values and supports thousands of industries with hundreds of thousands of employees.  Both Fannie and Freddie have been in conservatorship since 2008 and supporting cash-flow needs with a credit line from the U.S. government.    Now the government (and many industry experts) wants the private sector to play more of a part in home financing.

What does this mean for community associations?  It could mean several things: 

• It could mean that future home purchasers will have to fund a larger down payment.  If home or unit owners have more at stake in the property they will be more likely to take care of the property and less likely to default. 
• It could mean that the historically low mortgage rates will go up - making homes or condominium units less affordable.  Higher interest rates may prolong sales of abandoned properties. 
• It may mean that Fannie, Freddie and other GSEs will be required to dispose of properties acquired as a result of failed mortgages even at a loss - resulting in better bargains.  

Fannie Mae recently auctioned close to 100 South Florida properties.  Those properties were only offered to owner-occupants (individuals and families who plan to live in the homes), not investors, in an effort to stabilize neighborhoods severely impacted by foreclosures.

There are some obvious benefits to GSE financing and some obvious detriments.  One benefit is flexibility - government backing allows Fannie Mae to offer hardship relief to home/unit owners.  For example, Fannie has the ability to offer loan forbearance to mortgagors plagued with chinese drywall.   Skipping six (6) months of principal payments may be all that is needed for homeowners to catch up with other financial obligations (such as community assessments).

Community association leaders and members can take strategic actions to stabilize their own communities.  Community associations have the power to regulate use and occupancy of the properties, the level of maintenance and care required, and can even establish guidelines regarding the financial responsibilities of new members.  With a little planning, advice of counsel and other professionals and effort by board members, committee members and other volunteers - you can make your community better positioned in the future.

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Ownership of Property Governed by a Condominium, Cooperative or Homeowners' Association Carries Significant Responsibilities. 

Gary A. Poliakoff, J.D.  and Jennifer Bales Drake both interviewed on Fox Business News.  Click HERE to watch Gary Poliakoff.  Click HERE to watch Jennifer Bales Drake.

Owning property governed by a community association carries responsibilities in addition to privileges.  Among other things, owners bear responsibility for the costs associated with maintenance, repair, replacement and protection of the common property and facilities as well as administration of the Association. 

Mr. Poliakoff explains how important it is for buyers to research the financial status of the Association before purchasing a property in a "Shared Ownership Community" or "SOC", which is the term used in his new book, New Neighborhoods: The Consumer's Guide to Condominium, Co-Op and HOA Living.   The interview also includes comments relative to the housing market, especially with regard to the impact of lending criteria by government sponsored entities such as Fannie Mae and Freddie Mac. 

Ms. Drake explains the pitfalls of leasing residential property in the current foreclosure market to Fox Business News' co-anchors Dagen McDowell and Brian Sullivan in the interview posted above.  Bank foreclosures are responsible for significant losses of revenue to community associations throughout Florida and nationwide.

The more owners understand the obligations associated with ownership and occupancy of a residence within a shared ownership community the better.   Community leaders are, for the most part, owners as well.   Minimizing disputes that can become quite costly and aggravating for everyone involved is especially important in this economy, as community leaders need to focus on streamlining operations, reducing expenses and handling delinquencies.

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