Condo Media - September 2011 - 33

by Nena Groskind

“I

f at first you don’t succeed, the adage tells us to “try, try again.” The Federal Housing Administration (FHA) has been trying for the past three years to develop certification guidelines for community associations defining the standards they must meet to make existing owners and prospective buyers eligible for FHA-insured mortgages. The first effort, published in Dec. 2009, stumbled badly, to say the least. The outcry from industry executives forced agency officials to withdraw the guidance and revise it. The latest version, published June 30, was better in some respects, but worse — much worse, many believe — in others. The consensus as of a few weeks ago (when Condo Media went to press): The FHA still hasn’t gotten it right. With the FHA now insuring an estimated 30 percent of residential mortgages, FHA certification has become much more important for associations than it was in the past. But if some of the more troublesome provisions aren’t revised, warns Andrew Fortin, vice president in charge of government affairs for the Community Associations Institute (CAI), the FHA certification process for community associations “will come to a screeching halt.”

Unpleasant Surprises
This is not the outcome industry executives were anticipating earlier this year. Based on their discussion with FHA staff members, most were predicting the revised guidance would address key industry concerns, add clarity and contain “no surprises.” They were right on two counts: The guidance did clarify some questions and address some problems. But, it also contained many surprises, most of them unpleasant. The first indication that all might not be well was the length of the document — it had expanded from 15 pages to 94; as anyone familiar with the regulatory process will tell you, a six-fold increase in regulatory guidance is rarely a good sign. Industry executives who reviewed the guidance immediately lit up e-mail discussion groups with the problems they were identifying. Some commenters were more or less concerned about specific issues than others, but the certification language concerned just about everyone. The revised guidance added provisions requiring someone — the association’s board, manager or “authorized representative” — to affirm that the community complies with “all state and local condominium laws and all

FHA condominium approval requirements” and to attest further that they know of no “circumstances or conditions that might have an adverse effect on the project or cause a mortgage secured by a unit in the project to become delinquent.” Adverse conditions that might affect a community include: construction defects and “substantial disputes or dissatisfaction among unit owners about the operation of the project [or the association], and disputes concerning unit owners’ rights, privileges and obligations.” In addition to stipulating that the community does not have these or other material adverse conditions, the individual providing the certification also has “a continuing obligation to inform HUD if any material information [submitted] is no longer true and correct.” The scope of those assurances and the liability they create is certainly “daunting,” observed Patricia Raymo, vice president of Mortgage Master Inc. This is made more daunting by the penalty the Department of Housing and Urban Development (HUD) can impose (up to 30 years in prison and a $1 million fine) if any of the information certified is subsequently found to be inaccurate or untrue. Not too

CONDO MEDIA • SEPTEMBER 2011

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Condo Media - September 2011

Table of Contents for the Digital Edition of Condo Media - September 2011
