FHA Condo Approval Specialist: But the Master Association Has Reserves

But the Master Association Has Reserves

fha condo approvalBut the Master Association Has Reserves

A few months ago, I received a phone call from a reverse mortgage loan officer regarding an association that was recently Rejected for an FHA Condominium Approval.  He said that he has clients in the community trying to get a reverse mortgage but can’t because it is not approved with FHA.

Another company had submitted the condominium to FHA for approval but once it was Rejected, they didn’t know how to get it approved.  Although there were several reasons for the Rejection, the biggest hurdle was that the condominium did not have its own reserve account.  FHA requires that 10% of the annual common charges be contributed to a reserve account each year.

At first glance, this condominium was not doing so.  However, after a conference call with the loan officer and the property manager, a light appeared at the end of the tunnel.

The condominium shares a campus with another condominium.  The two are part of a Master Association.  The Master Association is responsible for the collection of all common charges in both condominiums.  All common elements and limited common elements are owned by the Master Association; their maintenance and upkeep are the responsibility of the Master.  The two condominiums have few bills of their own.

Neither of the two condominiums maintain their own reserve accounts.  The Master Association maintains reserve accounts and collects money for their funding annually.  Because the condominiums don’t own their common elements, I didn’t believe that the condominium would be required by FHA to have its own reserve account.  Since the Master met FHA’s reserve requirements, the condominium should get approved.

We accepted the challenge and began compiling documents.  They included the budgets, income statements and balance sheets for both condominiums and the Master as well as the legal governing documents for the Master.

After some back-and-forth with FHA and providing a detailed explanation of the workings of the Master and the condominiums, we were pleased to provide the condominium with the FHA approval notification today. 

Shortly thereafter, I received a voicemail from the loan officer that nearly ruptured my eardrum.  Let’s just say that he wasn’t as optimistic as I was that the condominium would get approved and his jubilation spilled over in the form of volume on the message.  It may be the best business voicemail of all time.

Top Photo Credit: (c) Can Stock Photo / joyfuldesigns

The Condominium Project Approval Team at ReadySetLoan is dedicated to helping condominium projects across the nation to obtain their approvals with FHA and the VA or become recertified with FHA.  We have assisted nearly 200 condominiums and we can help your association.


ReadySetLoan is an active member of the Connecticut and New England chapters of the Community Associations Institute (CAI) and is a frequent contributor to Common Interest Magazine as an expert in FHA/VA condominium project approvals.


Please contact us with any questions regarding FHA or VA condominium project approvals.  You can email me at askeric@readysetloan.com or call me at 404-433-4565. I will be happy to answer any of your questions.


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Comment balloon 20 commentsReadySetLoan Condo Approval Team • June 02 2015 02:50PM


This condo approval situation or lack there of is incredibly pervasive.  Many counties have but a handful of approved complexes.

Posted by Jeff Jensen (The Federal Savings Bank/Lending in 50 states) about 4 years ago

Eric - I have seen that arrangement in New York.  Condo phases one Hoa and reserve.

Posted by Grant Schneider, Your Coach Helping You Create Successful Outcomes (Performance Development Strategies) about 4 years ago

Eric, kudos to you for putting together the pieces of the puzzle so the FHA could approve the Condo development. (Sounds of clapping and shouts of Bravo!)

Posted by Sharon Alters, Realtor - Homes for Sale Fleming Island FL (Coldwell Banker Vanguard Realty - 904-673-2308) about 4 years ago

Eric another job will done, and further proof that you are the one to contact to help get FHA Condo Approvals!!!

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) about 4 years ago

There are a number of companies, law firms and others that attempt to do the work that you do, but none are any better. Great job!

Posted by Joe Petrowsky, Your Mortgage Consultant for Life (Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709) about 4 years ago

Eric, I’ve been in transactions like that … where there is a Master Association and other associations that fall under it.  Many simply don’t use common accounting practices.  It’s a matter of someone, like you, willing to do the work and solve a problem. Great job!  Congratulations.

Posted by Kathleen Daniels, San Jose Homes for Sale-Probate & Trust Specialist (KD Realty - 408.972.1822) about 4 years ago

Don't have many FHA transactions here and they were homes. Maybe only 2 in the past few years. Happy not to deal with that.

Posted by Bill Reddington, Destin Florida Real Estate (Re/max Southern Realty) about 4 years ago

Hi Jeff Jensen - it is unfortunate that more associations aren't approved with FHA.  Folks think it is too difficult and, yes, there are difficult ones like this.  But even this one proved to be possible once it was examined.  I wonder how many others don't complete the process - or don't even begin - because it is perceived to be impossible.

Hi Grant Schneider - NY is an animal of its own.  It doesn't allow legal phasing so communities have to use a Master Association to link themselves together.  That is a future blog article

Thank you Sharon Alters - it's funny that you mention puzzles because I love solving them!

Thank you George Souto .  Maybe it's my mortgage-brain that thinks "how can I get this done?" and not "can I get this done?"

I greatly appreciate your comment Joe Petrowsky .  Some of those firms may be trying to learn like I did.  I hope to stay a few steps ahead of them! :)


Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) about 4 years ago

Thank you so much Kathleen Daniels !  I do derive great pleasure from accomplishing "difficult" tasks.

Thank you for reading Bill.

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) about 4 years ago

That is a lot of digging and submissions to get that complex FHA certified.  Well done

Posted by Ed Silva, Central CT Real Estate Broker Serving all equally (RE/MAX Professionals, CT 203-206-0754 ) about 4 years ago

Hi Eric.  You are the FHA condo man.  Good luck with your new hearing aid.

Posted by Conrad Allen, Webster, Ma, Realtor (Re/Max Professional Associates) about 4 years ago

Thank you Ed Silva - it becomes a game after a while and I hate to lose.

 Conrad Allen ...what?  I can't hear you

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) about 4 years ago

Eric - I believe most people don't make all the right connection. At least I didn't. I knew that you were doing, but when I started thinking about the reverse mortgage, I did not make the connection, that this approval is needed not only for a FHA financing, when you buy, but also for a reverse mortgage.

It came as a surprise later. I would seriously consider mentioning it in the description of what your team does.

Just a thought

Posted by Jon Zolsky, Daytona Beach, FL, Buy Daytona condos for heavenly good prices (Daytona Condo Realty, 386-405-4408) about 4 years ago

Condo man? Eric 's new superhero tag in the Real Estae world?

Posted by Richie Alan Naggar, agent & author (people first...then business Ran Right Realty ) about 4 years ago


Things get interesting . . . . I hope things work out for everyone involved.

Good luck and success.

Lou Ludwig

Posted by Lou Ludwig, Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC (Ludwig & Associates) about 4 years ago

Thank you Jon Zolsky, Daytona Beach, FL .  I wil update my signature.

Condoman!  I like that Richie Alan Naggar author of books on Life-Love-Intimacy-Purpose 

Thank you for reading Lou Ludwig 

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) about 4 years ago

Unbelievable.  In Naples our associations have so much reserve money that we find them putting in pavers, upgrading landscaping, painting and improving all of the time with no additional cost to the owners.

Posted by Chris and Dick Dovorany, Broker/Associate at Premiere Plus Realty ( Homes for Sale in Naples, Bonita Springs and Estero, Florida) about 4 years ago

Chris and Dick Dovorany -  Reserves are calculated for certain purposes, and there simply can't be too much money. The law is very specific as to how it works and what has and can be included. Except for mandatory 3 items, the association can include any expense, which is $10K or more, so, probably, all your improvements are voted for and the money for them is included in the reserves.

What I mean is that they first have to say that they want the new landscaping, and new pavers, and vote for it, and then include it in the reserves, and then do the actual work, not that they have too much money, and now are figuring out where to spend it.

At least, this is how it is generaly done.

Posted by Jon Zolsky, Daytona Beach, FL, Buy Daytona condos for heavenly good prices (Daytona Condo Realty, 386-405-4408) about 4 years ago

Eric-  you went the extra mile and it certainly paid off!

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) about 4 years ago

Hi Chris and Dick - hopefully they have reserve studies to show that they will have sufficient funds when it comes time to pave, do siding and re-roof!

Jon Zolsky, Daytona Beach, FL - I'm sure you've seen it time and time again when associations don't properly prepare for future capital projects.  Special assessments can really impact a unit's value.

Hi Joan Whitebook - it has become a fun game and I hate to lose. :)

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) about 4 years ago