But 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 firstname.lastname@example.org or call me at 404-433-4565. I will be happy to answer any of your questions.
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Check out our article in Common Interest magazine on page 19!