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On Thursday, November 19, 2009, FHA hosted a conference call discussing the newly released condominium guidelines. The call was the first outreach by FHA to lenders and other interested parties to begin the process of clarifying detail and taking questions related to the impact of the new requirements. Two of the areas of concern for CAI did come up in the discussion.

First, FHA discussed how they view the implementation of the budget review process required by the guidelines. FHA noted that their primary concern is that lenders review the budget to ensure that the budget is adequate, that there are provisions for funds for the upkeep and maintenance of common elements and roughly 10 percent of the budget is dedicated to reserves. The discussion focused on the reasonableness of the budget examined and FHA indicated that lenders should look to such mitigating factors as recently replaced common elements of the property. If these criteria are not met, then the lender or FHA will request a reserve study undertaken within the preceding 12 months.

Next, FHA staff touched on the issue of dues delinquency. Under the guidelines, condominium association with more than 15% of units 30 days delinquent in assessments will not qualify for FHA approvals. On the call FHA staff noted that this is an area that requires further work. CAI has expressed its concern that the 30-day, 15% delinquency rate, calculated by units is not an accurate measurement of an associations financial health. Rather, CAI has suggested that the FHA should use a longer delinquency period of 90 days and to look at the association budget to see if it has a line item for bad debt. CAI will continue to engage them on this issue.

Also FHA acknowledged that collection of data on owner occupancy levels may prove to be problematic and indicated that based on feedback from the condominium industry (i.e.- CAI) they will have to continue to work through this issue.

While many questions remain and many concerns will need to be addressed, CAI’s message is being heard.  

In the weeks to come FHA will be releasing additional information to answer questions posed by CAI and other organizations. CAI will continue to provide updates and to formulate tools to assist our members in understanding the approval process and how to position their association to meet the requirements. check the Legislative Heads Up page of our website for new information as it becomes available.

Recently the Federal Housing Administration (FHA) issued two new guidance letters on proposed transitional and final criteria for FHA mortgage insurance on condo loans.  You can see the guidance letters on the FHA website here and here.  CAI has also prepared a summary of the most recent guidance and an FAQ for those who would rather not wade through all the regulatory language. 

CAI continues to speak with FHA staff on a regular basis to attempt to address our members continuing issues with this program.  As additional information becomes available we will post it on our legislative Heads Up page, so keep checking back for more updates.

No, not the kind that NFL coaches throw when they think the refs have missed a call and want a video review, but the kind the Federal Trade Commission is talking about and writing regulations about. 

CAI's Legislative Heads Up web page has more information, but in short, “Red Flag” rules require that certain entities that extend credit or payment plans to consumers adopt policies to flag consumer identity theft.  The big question, of course, is do these rules apply to community associations?   As is the case with most complex government regulatory schemes the answer is a clear and unequivocal "MAYBE".

Generally the attorneys we consulted believe that these rules probably don't apply to most community associations, but they were concerned that the broad nature of the regulatory language may mean that the regulations could apply under certain circumstances. Because each association is different, and their assessment policies, special assessments etc, may be handled differently, it is impossible for us to say one way or the other if the rule applies to any specific association or circumstance.

Which means each association needs to examine their policies and procedures regarding payments from owners in consultation with their association attorney.  To help get that conversation started, we have put together a explanatory memo, with a sample policy, that is designed for an association to use in conjunction with advice from their attorney to understand the rule and make a final determination as to implementing a policy in their community.