U.S. Senate Passes Two Amendments With Hope To Help Homeowners With Failing Foundations

Last Wednesday, August 1st, the U.S. Senate passed two amendments that aid the issue of failing foundations in northern Connecticut.

The first amendment passed appoints the Government Accountability Office to assess the financial burden of the crumbling foundation crisis and outline a regulatory and legislative action to help the issue.

Officials have stated that a certain mineral, pyrrhotite, is the cause of the problem. Leading the second amendment to mandate the U.S. Geological Survey to create a map showing where the mineral is found across the country.

A state report shows that pyrrhotite used in the concrete aggregate for the foundations that have crumbled is partly to blame. The problem was detected in north-central Connecticut, Gov. Dannel Malloy estimates that as many as 34,000 homes in 36 towns could have failing foundations.

Insurance companies are known to deny crumbling foundation claims stating that the problem does not qualify under their definition of “collapse”. The cost of a crumbling foundation can cost a homeowner up to 200,00 in repairs.

The amendments were presented by Sens. Chris Murphy and Richard Blumenthal.

Sen Murphy stated, “These amendments are an important step in the right direction to solve this crisis. These programs will ensure future builders do not use concrete from quarries with pyrrhotite. There’s a lot more that needs to be done and I will continue to fight every day for federal assistance to solve this crisis.”

Sen Blumenthal stated, “These two amendments will help further our understanding of this devastating natural disaster — answering critical questions such as where else pyrrhotite has been found, the fiscal impact of the crisis and existing regulations and legislation that could be tapped to provide urgently needed direct aid to property owners. Local and state governments have stepped up, and I am pleased that Congress is beginning to do so as well.”

Resp. Joe Courtney and John Larson worked on the amendments and presented a similar legislation that passed the U.S. House of Representatives in July. Jointly they stated that they will continue to press for more support for the homeowners grappling with the issue in their district. “As we have said before, no single bill or action is going to be able to fix this problem and we remain committed to pressing forward with these proposals and others at every available opportunity” they said.

The two amendments are the latest in many federal solutions Connecticut’s congressional delegation has sought for victims.

ADA vs FHA: How do they affect community associations?

 

The Americans with Disabilities Act and the Fair Housing Act have several similarities.

Both outlaw discrimination against individuals with disabilities, require reasonable accommodations and modifications, and mandate features of accessibility, design, and construction.

However, the ADA provides that there cannot be discrimination against persons with disabilities in a place of public accommodation. Unless your property includes a facility that is open to the general public such as a clubhouse, a pool, or parking lot, the provisions of ADA do not apply. The FHA requires that all covered multifamily dwellings designed and constructed for first occupancy after March 13, 1991 be accessible to and usable by people with disabilities.

For a definition of covered multifamily dwellings and other information contact: http://portal.hud.gov/hudportal/HUD

There are seven basic requirements that must be met to comply with the access requirement of the act. They are the following:

1-      An accessible building entrance on an accessible route.

2-      Accessible common and public use areas. – Cut outs on curbs, routes without stairs to clubhouse, pool, etc.

3-      Usable doors – Doors to entrances and interior doors must be wide enough to accommodate a wheelchair.

4-      Accessible route into and through the dwelling unit

5-      Light switches, electrical outlets, thermostats and other- no lower than 15 inches or higher than 48 inches from floor.

Environmental controls in accessible locations.

6-      Reinforced walls in bathrooms for later installation of grab bars required around tub, toilet and shower.

7-      Usable kitchens – must allow parallel approach to sink and stove and forward approach to other appliances.

Community associations are required under FHA to make reasonable accommodations when necessary to allow the handicapped owner to enjoy his or her dwelling.

If you are having a problem regarding a disability, handicap, or reasonable accommodation issue you should consult with your attorney before taking any action.

Can I Still Get A Mortgage After Credit Problems?

It depends on what the problems were and how long it’s been since you had those problems.

Negative Items on Your Credit Reports

Traditionally, someone with credit problems — like those brought on by foreclosures, bankruptcy, or general poor financial health — will have a hard time getting a mortgage (especially one with good terms and conditions) until these negative items age off.

For example, bankruptcy can be reported for 10 years from your filing date. One exception is a Chapter 13 bankruptcy, where the debtor pays back some or all of the debt over time. Discharged Chapter 13 bankruptcies may be removed seven years from the filing date.

Here’s a breakdown of how long some common negative items can stay on your report.

  • Bankruptcies: 10 years from the filing date; Seven years for Chapter 13 cases
  • Foreclosures: Seven years
  • Late Payments: Seven years from the late payment date
  • Collection Accounts: Seven years and 180 days from the delinquency date on the original debt
  • Short Sales: Seven years
  • Repossessions: Seven years
  • Judgments: Seven years if it’s paid; potentially longer if it’s unpaid
  • Tax Liens: Seven years after they are paid
  • Charge-Offs: Seven years from the date the account was charged off

Your credit blunders may mean you don’t get the lowest rates or best terms and conditions, but that doesn’t mean all hope is lost. If you’re ready to get the home of your dreams, it’s time to take action on improving your credit.

Steps to Take to Help Get Ready for a Mortgage Application

  1. Figure Out What’s Hurting Your Credit

Before you apply for a mortgage, you’ll want to review your credit reports regardless of where your credit stands. This gives you a good starting point to first see what credit problems are affecting you, as well as to look for any errors that may be bringing down your scores. If you see something wrong, credit bureaus have to respond to any disputes you file.

  1. Do Your Part to Improve Your Scores

If you can hold off applying for a mortgage until you’ve done some work to improve your scores, it may ultimately save you time and money. Things like making your payments on time, limiting the number of inquiries you make on your credit, and paying down your debts to improve your credit utilization ratio can help significantly.

  1. Consider Seeking Professional Advice

There’s a lot you can do to repair your credit on your own, but if you’re having a hard time, it’s good to know that there are other options. Professional credit repair experts may be able to help you with everything from filing disputes to figure out the necessary supporting documentation.

  1. Save Where You Can

While you’re working on improving your credit, it’s a good idea to start (or continue) setting money aside. The more you can save for a down payment, the better off you’ll likely be. A larger payment upfront can be appealing to lenders and also can potentially mean less interest over time and lower monthly payments. However, this doesn’t mean you shouldn’t be using the money to pay down debts (and, in turn, improving your credit utilization).

Remember, bankruptcies and other significant credit problems don’t automatically lock the door on getting a mortgage. You just need to think strategically and do your best to get your credit moving in the right direction.

10 Questions to Ask the Condo Board Before You Buy!

Before you buy a condominium, have your REALTOR® contact the condo board with the following questions. In the process, you’ll learn how responsive — and organized — its members are. You’ll also be alerted to potential problems with the property.

1. What percentage of units is owner-occupied? What percentage is tenant-occupied? Generally, the higher the percentage of owner-occupied units, the more marketable the units will be at resale.

2. What covenants, bylaws, and restrictions govern the property? What grandfather clauses are in place? You may find, for instance, that those who buy a property after a certain date can’t rent out their units, but buyers who bought earlier can. Ask for a copy of the bylaws to determine if you can live within them. And have an attorney review property docs, including the master deed, for you.

3. How much does the association keep in reserve? Plus, find out how that money is being invested.

4. Are association assessments keeping pace with the annual rate of inflation? Smart boards raise assessments a certain percentage each year to build reserves to fund future repairs. To determine if the assessment is reasonable, compare the rate to others in the area.

5. What does and doesn’t the assessment cover? Does the assessment include common-area maintenance, recreational facilities, trash collection, and snow removal?

6. What special assessments have been mandated in the past five years? How much was each owner responsible for? Some special assessments are unavoidable. But repeated, expensive assessments could be a red flag about the condition of the building or the board’s fiscal policy.

7. How much turnover occurs in the building? This will tell you if residents are generally happy with the building. According to research by the NATIONAL ASSOCIATION OF REALTORS®, owners of condos in two-to-four unit buildings stay for a median of five years, and owners of condos in a building with five or more units stay for a median of four years.

8. Is the condo building in litigation? This is never a good sign. If the builders or home owners are involved in a lawsuit, reserves can be depleted quickly.

9. Is the developer reputable? Find out what other projects the developer has built and visit one if you can. Ask residents about their perceptions. Request an engineer’s report for developments that have been reconverted from other uses to determine what shape the building is in. If the roof, windows, and bricks aren’t in good repair, they become your problem once you buy.

10. Are multiple associations involved in the property? In very large developments, umbrella associations, as well as the smaller association into which you’re buying, may require separate assessments.

Our Condominium Has 50% FHA Concentration – Now What?

Our first response would be to make sure that you don’t lose your FHA Condominium Project Approval! Obviously, FHA buyers are attracted to your community so it would be beneficial to the association to maintain this approval (Law of Supply and Demand).

Really, though, the question stems from the FHA guideline that the maximum concentration of FHA loans in a condominium is 50%. FHA uses case numbers to track all FHA loans and no FHA loan may exist without one. Once the 50% level is reached, case numbers may no longer be automatically assigned using FHA’s online system FHA Connection.

However, FHA does allow greater than 50% concentration in condominiums that meet its guidelines to be granted an exception. In these cases, lenders must contact the jurisdictional Homeownership Center (HOC) and request a case number manually. If the condominium meets the exception criteria, FHA will allow up to 100% FHA loan concentration in the condominium.

All of these criteria must be met in order for FHA to allow the exception:

 The project must have at least 4 units
 The project must be 100% complete and has been completed for more than 1 year
 100% of the units have transferred from the developer and no one entity owns more than 10% of the units**
 The project’s budget provides for the funding of a reserve account greater than or equal to 10% of the annual budget
 Voting control has transferred to the unit owners
 The owner-occupancy ratio is at least 50%

**Exceptions to the 10% criterion: (1) if the project is 10 units or less, no one person/entity may own more than one unit; (2) Federal, state and qualified non-profit programs may own more than 10% of the units provided that the program is designed to assist low- and moderate- income buyers and renters; and (3) units owned and inhabited by an investor are considered owner-occupied.

The concentration exception terminates with the expiration of the condominium’s FHA project approval. Once the project is recertified, the concentration exception may be sought again. Unless HUD changes this with the issuance of another Mortgagee Letter, it can be assumed that exceptions will continue to be granted once the project is approved and continues to meet the above-mentioned criteria.

Does HUD Allow Private Transfer Fees? Yes and No

One of the major topics of discussion at a round table discussion with HUD was Private Transfer Fees, aka 3rd party transfer fees, community enhancement fees or any other fancy name that you might have heard. Basically, these fees are deed restrictions which require the seller of a condominium unit to pay a fee to an entity other than the buyer upon conveyance. A third party could include a management company, the association or an affiliated or unaffiliated entity.
HUD said that it is encountering an increasing number of condominiums whose legal governing documents require that unit owners pay some sort of 3rd party fee upon the sale of the unit. These fees are subject to 24CFR203.41. This section of the Code states that legal restrictions on conveyance may not limit the sales proceeds retained by the seller. [This doesn’t only apply to condominiums.]
Basically, a condominium’s CC&Rs may not limit the amount a seller may gain from the sale of his/her unit EXCEPT for the exceptions laid out in the section of the code named above.
Because governmental language can be vague at times (ah-hem), the session sought to clarify it as it pertains to condominiums:
 Third party fees that are administrative in nature are acceptable. This would include reasonable fees charged by an HOA or management company for the processing of resale packages or for updating the list of unit owners, among other administrative-type duties.
 Capital contributions are acceptable. Again, within reason, a requirement for the seller to contribute to the reserve account is acceptable because it is a benefit to the association.
 Fees paid to affiliated or unaffiliated third parties are NOT acceptable. These would include required transfer fees paid to entities such as non-profit organizations that are not for the betterment of the condominium. This could be a topic in and of itself.
 Fees may NOT be a percentage of the sales price even if the fees belong to the first two categories above.
 Buyers may NOT pay the fees that are not acceptable. Even though the section of the Code pertains to the proceeds of the sale to sellers, HUD has determined that buyers may not pay the fees on behalf of the sellers.
If a developer or association wishes to collect the unacceptable fees and still be eligible for an FHA project approval (and, therefore, FHA-insured loans), creating an exemption in the CC&Rs for units encumbered with FHA financing is allowed. However, HUD does want specific language to be included in order for the project to be eligible.

What Types of Condominium Projects are Approvable by FHA?

This is one of the most commonly-asked question that we receive.  The better question to answer is Which types of condominiums are NOT approvable by FHA?   Then we can deduce that all other types of condominiums are eligible for FHA condominium project approval.
These projects are ineligible for FHA condominium project approval:

♣ Projects where more than 25% of the total floor area is non-residential.  That is the basic guideline although there may be exceptions granted that will allow up to 50% in certain circumstances.
♣ Timeshares and Condohotels (Condotels).  Segmented unit ownership or condominiums that also operate as a hotel.  Condominiums cannot offer hotel-type services such as a front desk, room service or maid/cleaning service or offer leases or rentals for less than 30 days (aka “transient leasing”).
♣ Multi-dwelling unit condominiums are fairly rare but this means that the condo units are multi-family dwellings and the project consists of a grouping of these whether they are attached or detached.  These are not allowed.
♣ Mandatory rental pooling of the units is not allowed.
♣ Condominiums converted from hotels or motels.
♣ “Cloud Condominiums and Co-Housing communities: “Cloud” condominiums are not eligible for FHA approval.  Co-housing communities may be eligible if they meet FHA guidelines for approval.
♣ Mandatory membership to a country club or the like.  Condominiums can be required to be a part of a Master Association but it cannot require unit owners to be members of any type of club, such as a golf or racket club.
♣ Houseboat condominiums is not something that we have seen but there must be enough of them out there – somewhere – for FHA to mention them on this list.
♣ Projects in designated coastal barriers according to FEMA such as sections of the Atlantic Coast, Great Lakes and Gulf of Mexico.
♣ Occupancy restrictions which is an entire topic by itself.  Basically, a third party, such as an HOA, cannot prevent or restrict the leasing or sale of a unit except under certain circumstances nor can the HOA screen a potential buyer or lessee (except the Registered Sex Offenders list).  A right of first refusal is acceptable provided that it is written in the proper manner.
♣ Projects that outright restrict leasing.  A project has to allow leasing of at least one unit.  Exceptions include age-restricted communities and projects that consist entirely of Affordable Housing units or the like.
♣ Conveyance/deed restrictions that require 3rd party transfer fees which are not administrative in nature or benefit the association directly.  For example, a transfer fee of $300 paid to the HOA for providing resale packages is acceptable as is one which contributes to the association’s reserve account.  Unacceptable transfer fees include those tied to a percentage of the sales price or those paid to a “nonprofit organization” for any reason.
The above list represents the major categories of condominiums that are not eligible for FHA project approval.  Most of them are also not eligible for Fannie Mae (conventional) financing options as well.  Age-restricted and Affordable Housing communities may be eligible for FHA project approval if they meet other FHA criteria for approval.