|Delinquent Condo Dues Force Out First-timers||| Print ||
|Thursday, 20 January 2011 17:19|
By Carl Medford, CRS
Special to The Times
It was as if some special alarm clock went off: hundreds of Alameda County buyers woke up January 3rd and immediately contacted their Realtor. It seems that buyers, especially “first-timers,” have decided now is the time to buy, and are again hitting the streets in swarms.
Lenders report that loan applications have risen abruptly and everyone is suddenly busy.
“Unfortunately,” says John Dutra of Summit Funding, “It’s a double-edged sword. While there’s a definite increase in applications, it’s becoming more difficult to get financing on the very properties first-time buyers typically migrate towards.”
He’s referring to condos. In fact, it’s become impossible to get loans in some developments. We recently reported that the recent FHA condo certification deadlines had passed without many condos renewing their certifications. No certification = no FHA loans in the development.
Although FHA revised the deadlines to give newer condos more time, there’s an even more insidious problem affecting ALL lenders, not just FHA — delinquent Home Owners Association (HOA) fees
Delinquent fees are a growing problem and it is rendering many condos virtually unsellable.
Many condo owners, faced with spiking costs, have stopped loan payments. Some also quit paying taxes and HOA dues. A number are attempting short sales, others are walking and letting foreclosures happen. In either case, HOAs no longer receive payments and the fees become delinquent.
Scores of developments are facing rampant delinquencies. Some HOAs, low on funds, can no longer service their obligations. Others are going bankrupt.
Fannie Mae and Freddie Mac realize this problem and are limiting allowable delinquencies in any development to 15 percent. If the number goes higher, Fannie and Freddie will no longer accept loans in that development. Period. Since Fannie and Freddie underwrite almost all loans, this means, in practical terms, no loans on those condos. Which limits sales to cash buyers only.
Consequence No. 1: No HOA fees, no loans, no sales. And, if you can’t sell, your home has suddenly become… almost worthless.
And here’s the irony: those very condo owners attempting short sales and not paying HOA fees are nailing the lid in their own coffin by pushing delinquencies over 15 percent. It’s an “insult to injury” situation and many don’t realize the pickle they’ve created.
Consequence No. 2: Many first-time buyers with limited resources (especially with FHA loans) are finding it almost impossible to buy a home. They’re sprinting off the starting blocks only to discover that, without warning, their 100-meter dash turned into… the hurdles.
Carl Medford is a licensed Realtor with Prudential California Realty in Castro Valley. He is also a licensed general contractor.