Real Estate & Property Law

HOA DELINQUENCIES - ONE FOR THE REALTORS

My readers supply me with such great questions that make me think, now why is that????? And thinking about a problem, taking what I know, and visualizing (or actually writing down) how to answer the questions is the only way to get your arms around it.

Here are some questions asked by a realtor (MC in Southern California):

QUESTION ONE: "Do you have any gems I can pass along to REALTORS??? CAR sent an article out stating that Fannie Mae may start considering delinquency rate before issuing loan - can't be more than 15%. Is that true?"

My response: The national HOA and Condo organization CAI (Community Associations Institute) has expressed concern about this to FNMA people and the response from Fannie Mae was that this is "just a guideline", not a line in drawn in the sand (my characterization of the information I received, not an exact quote), but the truth is, its a FNMA guideline that is published to lenders and developers and FNMA must, by all standards, tighten up because of the really bad mortgage situation, so .... I am assuming it will become a consideration for lenders - I think that the lenders who want to sell loans to FNMA and have to certify that their loans are within the guidelines will take it to heart. The "guidelines" on owner occupancy that have been published have become the "standard" for many lenders, those that want to sell to FNMA and those that recognize that a high percentage of rentals tends to lead to problems not experienced by developments with a high percentage of owner occupants.

QUESTION TWO: "Yesterday, I spoke with the escrow department of a large management company and I asked for the delinquency rate and the manager said that for the Buyer to receive that info, they must pay Condo Certs. She also said that I was the first Realtor to ask that question. What do think about this problem?"

My response: The seller is entitled to the information, so I would ask them to get it, or to provide the buyer with written authorization to get the information on his or her behalf. These are part of the HOA or Condo financial records that an owner can see (not the names and addresses, but the total delinquencies or rate, I would say, under Civil Code Section 1365.2) and so if you go through the owner, you should be able to get this information without "paying" another entity for it. HOAs and management agents are not obligated to give realtors, lenders or buyers this kind of information. And most are loathe to create a legal relationship where none otherwise exists (for good reason, I would say, as California is quite a "sue happy" environment).

Condo Certs is a very commendable repository for document exchange and I assume there are warnings on the site about not being responsible for the information and that is probably why people are referred there. I do not know if they ask HOAs and Condos for the delinquency rate but I would not be surprised, as their goal (besides being a commercial enterprise of course) is to facilitate the transfer of information and documents in a sale or transfer of property, and to do that, certain information is needed. They do ask for the owner occupancy ratio, a longstanding bone of contention between HOAs, Condos and managing agents. Statements about anything that carries potential liability for sellers, HOA or Condo Associations or their management agents are harder to get because of the risk of being quoted, misquoted, or sued over it. That is why they tend to disclose only those documents of information that are required by law (Civil Code Section 1368).

AND MORE GENERAL INFORMATION ON THE SUBJECT OF FNMA GUIDELINES:

I did a blog earlier on the subject of the new FNMA Guidelines that was about teaching lenders how to comply with them; however, when it came to having to certify that an HOA or Condo develop was adequately funded a big roadblock popped up, since anything can happen the day the financials go out, or before, and not be reflected in them. And no lender or realtor is likely to get the information about the percentage of delinquencies without having to go through proper channels.

And so, I say, Realtors! Stay informed on the hottest issues! And send me your questions through the website at http://www.californiacondoguru.com.

AND

You may want to sign up for my E-newsletter on the website if you are not already signed up. It's free. And I will be blogging about these things too so you might tell your realtor friends to get on board and follow the blog. I will be discussing these issues in the coming months.

Full post as published by California Condo & HOA Law on March 05, 2009 (boomark / email).