Loan rejected because HOA doesn't have adequate hazard insurance?

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jmatthew_IHB

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We live in a condo complex, and our unit is in escrow. The lender just rejected the buyer's loan (a buyer who is "more than qualified" <em>in the lender's own words</em>) because they say our HOA doesn't carry enough hazard insurance. Has anyone else heard of this happening?
 
Yes. This happens all the time. Our company requires that the HOA cover "interior fixtures" so quite frequently buyers have to pony up for extra insurance on top of HOA just to keep coverage at a reasonable replacement value.



The buyer should shop lenders. Not everyone has strict insurance requirements.



My .02c



Soylent Green Is People.
 
CR has a post today on a BK HOA in miami.



too many non-paying/FC condo 'owners'.





in the discussion, there was a good comment on the future for The OC:



<blockquote> OC Progressive (homepage, profile) wrote on Thu, 7/9/2009 - 3:27 pm



*



Many California HOA's will face tremendous stress during the next few years. Lenders are not responsible for ongoing assessments until the property is foreclosed on, and this process is moving extremely slowly. Plus, the HOA has to eat the attorney's fees charged by the collection agency filing liens and sending notices. All of the past due fees, late charges, and collection expenses are extinguished on foreclosure, unless the association chooses to go after an individual who has already defaulted.



So a foreclosed condo may have 18 months of past due assessments, plus thousands in collection costs charged by the management company and collection attorneys. As the number of these hits keeps increasing, the remaining owners see their assessments rise even more rapidly, making it more likely that more underwater owners will stop making their payments.



At some point, the directors resign and move out, the management company resigns, and you are left with a carcass where the courts and attorneys try to make some sense out of a mess. Meanwhile, if maintenance and replacements aren't done, you have the possibility of things like failed roofs, structural problems, uninsurability - the list goes on.

</blockquote>




<strong>Is your HOA going to go under? Have you looked at the financials of your HOA lately?</strong>
 
[quote author="freedomCM" date=1247213628]CR has a post today on a BK HOA in miami.



too many non-paying/FC condo 'owners'.





in the discussion, there was a good comment on the future for The OC:



<blockquote> OC Progressive (homepage, profile) wrote on Thu, 7/9/2009 - 3:27 pm



*



Many California HOA's will face tremendous stress during the next few years. Lenders are not responsible for ongoing assessments until the property is foreclosed on, and this process is moving extremely slowly. Plus, the HOA has to eat the attorney's fees charged by the collection agency filing liens and sending notices. All of the past due fees, late charges, and collection expenses are extinguished on foreclosure, unless the association chooses to go after an individual who has already defaulted.



So a foreclosed condo may have 18 months of past due assessments, plus thousands in collection costs charged by the management company and collection attorneys. As the number of these hits keeps increasing, the remaining owners see their assessments rise even more rapidly, making it more likely that more underwater owners will stop making their payments.



At some point, the directors resign and move out, the management company resigns, and you are left with a carcass where the courts and attorneys try to make some sense out of a mess. Meanwhile, if maintenance and replacements aren't done, you have the possibility of things like failed roofs, structural problems, uninsurability - the list goes on.

</blockquote>




<strong>Is your HOA going to go under? Have you looked at the financials of your HOA lately?</strong></blockquote>
This real estate downturn could be the death blow for condo/townhomes because of these HOA fee delinquency issues.
 
We've been over the HOA financials. They're not going under, and they have the statutorily required amount of insurance. I'm beginning to think that the lender is the one with the financial problems and is looking for a way to back out.
 
USC, did you study the financials of that condo you bought at south coast? is the HOA still solvent with all the FCs?



I would think those HOAs around southcoast would be a bellweather.
 
[quote author="freedomCM" date=1247276254]USC, did you study the financials of that condo you bought at south coast? is the HOA still solvent with all the FCs?



I would think those HOAs around southcoast would be a bellweather.</blockquote>
I did take a look at it and it was OK at the time of my purchase, subsequent to my purchase in the fall of 2008 things started heading downhill and the HOA fee was raised 20% across the board. The management company has taken steps to cut the operating expenses, including with the current vendors to the general economic downturn. The number of non-paying units is down from like 30% to 24%. I'll keeping a close eye on the quarterly financial updates that they send with the statements. Thank goodness that my HOA increase will be offset by the decrease in the property tax due to a lower assessed value. Even with lowering my rent to $1,600/month from $1.650/month, I'm still at 135 GRM and cash flow positive.
 
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