CAI’s Pennsylvania Legislative Action Committee (LAC) is the “watchdog” for the millions of homeowners living in community associations throughout the Commonwealth.  Volunteer delegates sitting on the LAC work very hard educating lawmakers, responding to legislation and supporting those who live in, volunteer with and manage community associations.

In an effort to help constituents, all too often legislation and regulations are proposed in Harrisburg with good intentions, but possibly costly and ineffective outcomes for homeowners.  Even worse, the proposed legislation could be unintentionally detrimental to homeowners living in community associations.

This is where the LAC gets involved. The LAC carefully considers legislative language, drafts position papers for legislators, and often drafts amendments to proposed legislation that will help homeowners.  Without the help of our lobbyist, the LAC would not be as effective in tracking and responding to all the legislation that is being proposed.  Lobbyists, of course, cost money and homeowners who benefit from the work of the PA LAC can help.

By supporting the LAC’s “Buck A Door” campaign, a community can aid greatly in the fulfillment of the LAC’s mission.  The money collected from the “Buck A Door” campaign goes directly to the LAC to help fulfill CAI’s advocacy role.

How will homeowners hear about this worthy cause that exists to help them?  Through CAI and through their community manager.  We owe it to our homeowners to inform them of the LAC’s work and efforts on their behalf.  Homeowners informed of LAC activities can also help educate our lawmakers through letters, phone calls and personal visits.

CAI’s PA LAC makes a strong difference in whether poorly considered and written legislation has unintended consequences.  Please consider supporting the LAC with a contribution from your community. A dollar per door (Buck A Door). Please share the “Buck a Door” information with your communities.

For up to date information on the LAC’s positions on current legislation, visit the legislative advocacy page on the chapter website.

Posted by Marianne C. Fein, CMCA
Community Manager, PA LAC Delegate

In 2010, Congress created the Consumer Financial Protection Bureau (CFPB) to serve as the nation’s “cop on the beat” to protect consumers from harmful financial products. Officially opened for business on July 22, 2011, the CFPB is now responsible for enforcing most federal financial consumer protection laws.

CAI’s members have a keen interest in the development of CFPB’s rules and regulations that could affect community associations. As a new federal agency, the CFPB is still working to define its approach to protecting consumers from abusive financial products and helping to ensure consumers have the right information to choose the financial products and services that will best meet their needs. While the CFPB’s authority extends from checking accounts to credit cards to payday loans, it also has significant authority over federal housing policy, mortgage lending standards and the home buying process.

CAI is following CFPB’s actions on: the definition of qualified mortgage, the regulation of transfer fees, association assessments, the definition of real estate settlement fees, foreclosure prevention and mortgage servicing standards. As such, the CFPB has the potential to impact community associations and the companies that serve them.

As noted, the CFPB has special authority over mortgage lending standards and real estate closings. The Dodd Frank Act gave the CFPB the responsibility of enforcing the federal Truth in Lending Act (TILA), a powerful consumer protection law. As the federal enforcer of TILA, the CFPB will establish and enforce mortgage lending standards that all lenders and housing market participants must follow.

Congress also transferred rulemaking and enforcement authority under the Real Estate Settlement Procedures Act from the Department of Housing and Urban Development to the CFPB. The bureau is in the process of updating real estate closing disclosures and real estate closing forms.

This combination of authorities means the CFPB sets the standards that govern almost every aspect of the mortgage lending and closing process.

CFPB is unique in that Congress granted the bureau the authority to expand firms under its supervision by regulation. Given the role of community associations in our nation’s housing markets and the authority of associations to foreclose as a remedy to perfect a lien, it is reasonable to expect the CFPB to examine community associations at some point in its review of the housing market.

The CFPB has three ongoing initiatives that can affect how community associations function.

Ability-to-Repay

The first initiative is the CFPB’s work on how association assessments factor into a borrower’s mortgage payment. Under the Dodd Frank Act, all lenders must verify a borrower can afford all payments associated with a mortgage loan, including association assessments. It is the CFPB’s job to write the rules to govern this process, which could include requiring associations to forecast assessment increases and the likelihood of future special assessments.

Transfer Fees

The second initiative CAI is monitoring is the CFPB’s review of transfer fees in community associations. While the bureau has not signaled that it intends to restrict mortgages in associations with a transfer fee, it is studying the use of transfer fees.

Mortgage Complaint Portal

An important new consumer protection developed by the CFPB is an easy-to-use website for homeowners to report mortgage fraud, abusive lending practices and housing discrimination. This will significantly improve consumer protection for homeowners and allow the CFPB to keep track of new mortgage products or any new market abuses. The website will also be a means for disgruntled residents to air complaints against associations. As the CFPB has announced its future rulemakings will be influenced by the nature of complaints it receives through this system, associations should be prepared to respond to CFPB inquiries and work cooperatively with the bureau in resolving legitimate consumer and homeowner complaints.

Because of its potential impact on community associations, CAI has added the CFPB to our Mortgage Matters program. CAI is working to protect homeowners in community associations and to ensure access to fair and affordable mortgage products for all current and potential community association residents. You can follow our work and share your thoughts at www.caimortgagematters.org.

The Pennsylvania Joint State Government Commission released its report on Common Interest Ownership Communities in late December and while the commission’s report falls short in certain goals outlined in the legislature’s resolution, the report is full of useful information and recommendations for community associations and policymakers in Pennsylvania.

The commission was not able to produce a list of all community associations in the Commonwealth and compile information on the types of infrastructure in these communities. Nor was it able to quantify the amount of taxes paid by those who live in community associations throughout Pennsylvania. While these results are disappointing, they are not un-expected, and the reasons why are discussed in the contents of the report. The report also contains eleven policy and statutory recommendations to the legislature.

CAI’s Pennsylvania Legislative Action Committee (LAC) provided data to the commission for its study and testified at a hearing in September, 2010 in Bushkill, PA. The LAC will review the report’s findings and recommendations in detail and make additional information available to members about the report and the LAC’s interpretation and positions on the policy recommendations. The full text of the report has been posted to our website where it can be printed, read or downloaded.

CAI members know that 2011 saw the beginning of the federal government’s effort to rebuild our mortgage finance system in the wake of the worst housing and economic crisis since the Great Depression. As Congress and a host of federal agencies worked through this process, hundreds of pages of proposed regulations were drafted and issued for public comment and analysis. From new Federal Housing Administration (FHA) condominium lending guidelines, to pending regulations on Qualified Residential Mortgages (QRM), to Qualified Mortgages (QM) and to the Federal Housing Finance Administration’s transfer fee rule, tomorrow’s mortgage market began to take shape. As we move into 2012, this process will enter a critical final phase and may trigger another round of uncertainty and confusion in the housing markets.

First, in early 2012, CAI expects the federal government to release the final draft regulations on QRM and QM. QRM regulations deal with the structure of mortgages and QM deals with qualification criteria for future borrowers. As drafted, both present a set of challenges to the housing markets in general and to community associations in particular.

As reported by CAI, the pending QRM proposal would have a significant impact on potential buyers. New requirements would mandate minimum down payments of 20 percent prevent financing of closing costs and realtor fees and would disqualify buyers with just one late payment on any installment account. It is estimated that 70 percent of currently qualified borrowers would not meet this standard. While it is expected that the QRM draft will be significantly revised, the ongoing uncertainty hangs like a dark cloud on the horizon.

Revised draft QM regulations will also be released in 2012. These regulations focus on a borrower’s ability to repay a mortgage and contain provisions that include community association related expenses. On the positive side, QM will require that a lender qualify a borrower not just on the mortgage amount, but also on other mandatory fees like association assessments. This should help reduce assessment delinquencies. On the downside, QM requirements may also take action on association transfer fees and require the inclusion of special assessments in the qualification calculation on the basis that the assessment will be in place for the life of the loan.

Finally, in response to CAI members’ ongoing pressure, FHA will be making additional changes to its condominium insurance guidelines. FHA has indicated that they will be issuing additional guidance to address issues with project certifications, transfer fees and management company fidelity bonding. This is good news for CAI members as FHA accounts for up to one-third of all condominium loans. On the downside, due to a pull back in bank lending and the insolvency of Fannie Mae and Freddie Mac, FHA has been forced to fill the vacuum in the mortgage market. This has stressed the agency and pushed its financial reserves to dangerously low levels. If the economy stumbles and FHA’s reserves tip into the red, the agency could need a congressional bailout. With the heated political climate super-charged by election year politics, any solvency issues with FHA would likely set of a firestorm that could sideline the critical lending role FHA is now playing.

There is one point we can be sure of among all this uncertainty and that is that CAI will be working to make sure that CAI members voices are heard in this debate.

As part of our ongoing Mortgage Matters Program, CAI is working to protect homeowners in community associations and to ensure access to fair and affordable mortgage products for all current and potential community association residents. You can follow our work and share your thoughts at www.caimortgagematters.org.

CAI’s Pennsylvania Legislative Action Committee is asking you not to be silent – but to yell out and tell us that you will help and donate an item to the LAC’s Silent Auctions!

The PA-LAC needs desperately to raise funds to support CAI’s legislative advocacy efforts. The primary goal of the PA-LAC is to monitor legislation and educate state lawmakers on behalf of community associations.  The PA-LAC is proactive in introducing and advocating for legislation that is beneficial to community associations and are equally active in opposing legislation that may be adverse to the interest of community associations.

In 2011 alone, delegates to the PA LAC considered positions on more than 15 pieces of legislation that impact the governing and management of community associations in Pennsylvania. In addition, the LAC met with Federal representatives on the ongoing FHA/mortgage issue, hosted dinners for the House and Senate Urban Affairs Committees, and hosted a Town Hall in Chester County that was attended by State Senator Dinniman and State Representative Truitt to discuss issues concerning community associations. The LAC is also pressing for adoption of Bills that would provide tax credits for municipal services for community associations in the Commonwealth as well as in the City of Philadelphia. For more information on the issues currently pending before the legislative action committee, visit the legislative page of our website.

The cost of lobbying and government relations is significant, therefore, we need your help.  The LAC is hosting two Silent Auctions – one will take place during the Poconos Holiday Party on December 7 and the second will take at the chapter’s Annual Meeting & Holiday Party on December 8.  Donations such as a gift card to a restaurant, tickets to a sporting event, gift baskets,  jewelry, house and home products, electronics, and best of all a coupon for your professional services are wonderful items to be auctioned off during our holiday parties.  Please consider the important work of the PA LAC…… and click here for the auction donation form.

Special thanks to those members who have already donated to the Silent Auctions:

Appletree Management
B.C. Property Management
Clarke’s Landscaping
EHD Insurance
F. David Sylvester & Associates
Hershey’s Mill Golf Club
Ken Walton General Contractor
Kipcon Inc.
L&L Services
MAMCO Property Management
Pocono Farms Country Club Association
Rivercrest Golf Club
Steven L. Sugarman & Associates
The Arrimour Group
Vector Security
Young & Haros

The ever-changing FHA Condominium Guidelines continued to create problems for many CAI members in 2011. Despite the challenges, CAI was able to work with FHA to amend some of the FHA lending criteria even as FHA released new policy that created new obstacles for condominium associations.

In June of 2011, FHA issued major revisions to the Condominium Guidelines, which, according to FHA, would address concerns raised by CAI. While the new guidelines added some flexibility on assessment delinquencies, commercial space and rental restrictions, it also imposed new and troubling criteria on fidelity insurance, project certifications and assessment delinquency calculations.

After the release of the new Guidelines in June, CAI worked with our members to escalate our efforts to persuade FHA to engage in a more rational and transparent process in developing condominium guidelines. First, CAI sent a letter summarizing concerns about the new Guidelines to the FHA commissioner. CAI noted that the requirements FHA imposed on fidelity insurance and project certifications were in conflict with many state laws and with the best practices of condominium associations. CAI also chided FHA for putting the burden of collecting assessments from bank-owned properties on association boards rather than on the banks that get a subsidy from FHA under the condominium loan program. CAI also filed an administrative challenge against the new Guidelines, arguing that FHA failed to do minimal due diligence when drafting the new requirements. Then, working with our state Legislative Action Committees, we took our concerns directly to members of Congress in August. Additionally, when FHA announced during a public training session that it would be looking at the issue of deed-based transfer fees, CAI sent a strongly worded letter urging it to engage in outreach and research before taking any unilateral action.

The arrival of fall saw the return on the investment in our Congressional Outreach. First, FHA backed away from their costly and duplicative management company fidelity bonding mandate. This was followed a few weeks later by key members of Congress and the Senate sending letters critical of the FHA Guidelines and the lack of transparency in their development. It is through these efforts that CAI will continue to move FHA policy to more rational and fair criteria.

As the year end approaches, FHA’s financial position showed significant deterioration, with the organization well below its statutorily-mandated reserve requirements. There were whispers in Washington of a pending bailout, which would be bad news for potential condominium buyers as FHA continues to be the pre-eminent lender for condominium mortgages. This also will likely make CAI’s task for pushing for reforms of FHA lending criteria even more challenging. At the close of 2011, it looks as if 2012 will be yet another year filled with challenges on the mortgage front.

As part of our ongoing Mortgage Matters Program, CAI is working to protect homeowners in community associations and to ensure access to fair and affordable mortgage products for all current and potential community association residents. You can follow our work and share your thoughts at www.caimortgagematters.org.

Congressional leaders are expressing serious reservations about Federal Housing Administration’s (FHA) mortgage-approval policies for condominiums-policies that are the source of mounting confusion and angst for condominium boards, homeowners and real estate agents nationwide. 

Community Associations Institute (CAI) says these policies are preventing many potential buyers from obtaining FHA-backed loans to purchase homes in those communities, putting entire condominium associations at risk and further worsening the already dismal residential real estate market.

While acknowledging the need for thoughtful and financially sound lending criteria, the 31,000-member organization has expressed public concern about past FHA lending guidance that has created continued “confusion and frustration” in the marketplace. That’s why CAI sought to bring Congressional attention to the issue.

“There seems to be an invisible barrier between FHA and condominium associations,” Sen. Scott Brown (D-Mass.) said in a recent letter to Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development (HUD). FHA falls under HUD’s jurisdiction.

“While both sides have been talking to each other, it doesn’t seem like there has been any movement towards a resolution,” Brown wrote. “I hope you will consider these concerns and work to bring certainty to condominium associations in what is an otherwise uncertain housing market. An obvious first step in this direction is to start the public review and comment period on (the) recently issued guidelines as soon as possible.”

Three members of the House Committee on Financial Services have also weighed in, urging FHA to reconsider mortgage approval policies that “. . . deny mortgages to condominiums associations with special assessments or that have obtained loans to do necessary improvements.” Signed by Massachusetts Reps. Barney Frank, Michael Capuano and Stephen Lynch, the letter also asks FHA to reconsider the mortgage-approval requirement that no more than 15 percent of condominium units can be more than 30 days past due on their association assessments.

The House members also weighed in on FHA’s public review and comment procedures, saying that “additional opportunities for public input before policy changes are implemented would greatly improve the process.”

With lenders Fannie Mae and Freddie Mac recoiling from unprecedented mortgage-related losses, FHA has assumed a far greater role in the home-sales market, now standing behind at least 30 percent of new home mortgages. That makes FHA lending criteria especially critical, not only for individual homeowners and buyers, but also for a sustained recovery in the housing market.

CAI and other organizations have worked hard to get Congressional leaders to address FHA’s mortgage approval guidelines and what CAI calls the agency’s “insular approach to policy development.”

“The letters sent by Congressional leaders are tremendously helpful, but the issues they address are still on the table,” said CAI Chief Executive Officer Tom Skiba, CAE. “And they are still adversely affecting thousands of condominium communities, millions of current and potential homeowners, and the U.S. housing market as a whole. We will continue to urge FHA to take a new, more transparent and thoughtful approach to its decision-making.”

Visit Mortgage Matters<http://dev.caionline.org/govt/MortgageMatters/Pages/default.aspx> on the CAI website to read the Congressional letters and get the latest information about the FHA and mortgage approval guidelines.

The Finance Committee of Philadelphia’s City Council held a hearing on Tuesday, October 18, 2011 at City Hall on Bill 110130 which would provide a credit against the tax for owners of condominiums, cooperatives and planned community units who do not receive regular City refuse, recycling and bulk item collection services. After lengthy testimony and questioning on the Bill from many proponents, and the Nutter Administration, the Finance Committee unanimously reported the Bill out of committee and to the full City Council, where it now awaits action.

CAI provided the following testimony at this morning’s hearing:

Good morning and thank you for this opportunity to testify before this committee.

My name is Tony Campisi and I serve as Executive Director of the Pennsylvania and Delaware Valley Chapter of Community Associations Institute. CAI is a 31,000 member national organization dedicated to building better communities. CAI provides information, education, and resources to association governed communities, including condominiums, cooperatives and homeowner associations, and the professionals that support these communities. The Pennsylvania chapter represents an estimated 15,000 such communities across the Commonwealth, including approximately 900 communities with thousands of housing units within the City of Philadelphia. Tens of thousands of Philadelphians call these association-governed communities home.

CAI’s Pennsylvania Legislative Action Committee supports adoption of City Council Bill 110130, which would provide a credit against the tax for owners of condominiums, cooperatives and planned community units who do not receive regular City refuse, recycling and bulk item collection services. The bill would remedy the City’s failure to provide municipal trash collection to these residents.

Councilman Kenney introduced legislation over a decade ago that extended eligibility for residential municipal trash collection to include owners of cooperatives and condominiums. On June 13, 2002 the Bill was adopted by City Council.  Then-Mayor John Street returned the bill to City Council without his signature, with a letter stating that the City would not enforce the law.  In response, City Council filed suit to compel the Administration to enforce municipal refuse collection from community associations in the City. This step was supported by all members of City Council, including then-Councilmember Michael Nutter, now Mayor of Philadelphia.  In 2005, the Pennsylvania Supreme Court denied Mayor Street’s appeal in the case, and affirmed the Commonwealth Court’s opinion in favor of City Council as the final ruling in the case.

Unfortunately for owners of condos, co-ops and planned community units in the city, the issue of refuse collection remains unresolved.  While the City has extended an offer of weekly curbside collection, the volume of trash that these communities accumulate makes this an unsanitary solution that would cause many other health and neighborhood concerns. Therefore, the City’s condominium, cooperative, and planned community residential unit owners continue to pay for a city service that they cannot use.

It has been suggested that a tax credit such as the one provided in this Bill may not pass Constitutional muster because it may create a separate and distinct class of residential real estate. I would suggest the city has already accomplished this by its refusal to adequately provide a municipal service to what the city considers a distinct class of residential property owner. And the reason why may in fact reside in the common understanding and interpretation of what a condominium is, or is not, under state statute. Pennsylvania’s Uniform Condominium Act, adopted in 1980 by the state legislature, along with two companion acts – the Real Estate Cooperative Act adopted in 1992 and the Uniform Planned Community Act, adopted in 1997 – define the creation, management and governance of association-governed communities in Pennsylvania. It is important, however, to note here that the three forms of ownership defined under these statutes simply define a legal form of home-ownership. They do NOT define a physical structure or a type of building. This is critical to the issue we are here to discuss today in the following manner. A condominium does not translate to a high rise or mid rise building just as a planned community does not translate to a sub-division with one acre lots in a suburban setting. A condominium, under state statute, may be a 25 story building with ten units per floor in Society Hill. It may be a townhouse community with four or six units connected in a row in South Philadelphia. It may be a 396 residential unit community consisting of single-family, detached homes, townhouses and condo units currently under construction at The Arbors at Eagles Point in the Byberry section of the Far Northeast. The point I make here is simple. A condominium, cooperative or planned community unit is nothing more than a single family home. These communities are not commercial buildings comparable to apartment buildings, owned by a single owner. These communities are a series of individual homes owned by many individual owners. A condominium association, in whatever physical structure it assumes, is no different than a block of row homes in any one of your council districts. A block of row homes consists of single family homes that line the sides of a block, connected by a shared common vertical wall, and each owned by an individual owner. A high rise condominium building consists of single family homes that line a hallway and that share a common vertical wall, stacked upon each other, with another common horizontal wall consisting of a ceiling in the unit below, and a floor in the unit above. Turn a high-rise condominium on its side and all you have is a series of individually-owned row homes that you might find on an average block in South Philadelphia, University City or Fishtown. Tell me why the owner of a condo should be treated any differently than the owner of a row home? Under current city practice, condo owners are treated differently – are treated as a distinct class of residential real estate – yet they pay the same municipal taxes, and that is inherently unfair.

This is an issue not limited to the City of Philadelphia. Community associations across Pennsylvania, and in fact across the nation, deal with this very same issue. In most states, owners in community associations pay municipal taxes for services that are, in many cases, not provided to residents who live within the association, including road maintenance, refuse collection and other municipal services. The owners who reside in these community associations pay for these services twice – once through municipal or property taxes and again when they privately contract for the services not provided by the municipal government. CAI has provided council with examples of how other cities across the state and nation have dealt specifically with the municipal trash issue.

Here in Philadelphia, Councilman Kenney is proposing that the City offer a tax credit of up to $200 per residential unit to address the disparity in collection services. CAI supports this legislation as a way to erase the inequality that has been permitted to exist in the collection of municipal refuse from condominiums, cooperatives and planned communities in this city for far too long.

Thank you.

For more on this issue, including the text of the Bill, visit the legislative page of CAI’s website.

The challenges presented by the wave of federal regulatory proposals that are reshaping the mortgage finance system made the summer of 2011 one of the busiest advocacy periods in the history of CAI. At stake is the health and marketability of the more than 24 million homes in community associations. CAI and our members, working through our Mortgage Matters Program, have been focused on three critical regulatory proposals; a proposed federal rule on transfer fees, Federal Housing Administration (FHA) condominium mortgage guidelines and Qualified Residential Mortgage Regulations. Each of these proposals as initially drafted had the potential to negatively impact community associations. To make matters more challenging, the financial reform process triggered more than 200 regulatory drafting exercises by a host of federal agencies on topics that include banking, insurance, hedge funds, mortgages, auto loans, credit cards and other financial services. In this flood of new regulations, it is difficult for any single industry to get their message through to lawmakers, but thanks to the work of CAI, our members and our allies, we have been making headway in shaping this important debate.

FHFA Transfer Fee Guidance: In late 2010 the Federal Housing Finance Agency (FHFA) issued a proposal that would have banned federally backed mortgages to any property in a community association with a deed-based transfer fee. Such fees are a common funding mechanism for community associations with up to 49 percent of associations using such fees to fund reserves, capital accounts or operations. If enacted as drafted, up to 11 million homes in community associations would have been unable to obtain mortgages. Thanks to an incredible effort by CAI members, the FHFA backed down from its initial proposal and issued a revised draft regulation that specifically excludes community deed-based transfer fees from the mortgage ban. The revised draft regulation is still pending, but FHFA’s retreat on the deed-based transfer fees put CAI on the map as a major player in the mortgage reform debate.

FHA Condominium Guidelines:  FHA issued new guidance in July in an effort to correct problems created by previous guidance on condominium requirements for FHA mortgages. FHA addressed longstanding issues raised by CAI such as allowing associations to impose rental restrictions, allowing for affordable housing units and added some flexibility for delinquencies. However, rather than completely fixing the issues with the program the new guidelines created a new set of challenges for condominium buyers seeking access to the more than thirty percent of all condominium mortgages FHA currently provides. Among the issues created by the new FHA requirements are:

• A costly fidelity bonding insurance for management companies, which is commercially impractical and in conflict with some state laws;
• A requirement that the submitter to FHA agree to keep FHA abreast of any conflict in the community and to assure FHA that a board will not take any action that might impact a borrowers ability to pay their mortgage;
• Inclusion of bank-owned properties in the assessment delinquency calculation; and
• An announcement that FHA will not approve any condominium project with a deed-based transfer fee, despite the Federal Housing Finance Agency’s findings (noted above) that such fees benefit communities and homeowners.

Stepping up the pressure on FHA to engage in a more transparent rule making process, CAI members in key states set up Mortgage Matters Teams and met with members of the House Financial Services Committee and the Senate Banking Committee during the month of August. This grassroots activity is beginning to pay dividends; FHA has already backed down from the manager bonding requirements and is now indicating it may back off its current position on deed-based transfer fees. Although progress with FHA has been slow, it is adopting the policy positions advocated by CAI and our housing allies.  Now that the debate is favoring CAI and our members, we will continue to step up our pressure on FHA and Congress to more quickly resolve the issues FHA is needlessly creating in the condominium market.

Mortgage Regulations (QRM/QM): In August, CAI submitted more than 200 pages of comments to federal regulators on proposals to tighten mortgage lending standards and reshape commercial mortgage products. Working with a coalition of housing interests that include the National Association of Realtors, the National Association of Homebuilders and consumer groups, CAI denounced the stringent proposals that would have set mortgage standards so high as to exclude up to 70% of current borrowers. CAI praised a proposal that would require a lender to factor in association assessments in the loan qualification process as such fees are mandatory.  However, CAI was critical of the proposal which would have required the lender to assume that any special assessment in place at the time of the loan qualification determination would continue for the life of the mortgage.  The comment period on these regulations closed in August and revised regulations are expected to be released in late 2011 or the first quarter of 2012.

As we fight for our members, we will work to build new avenues of communication between CAI members, federal regulators and key members of Congress. Our success depends on the ability of every CAI member to respond to calls to action to make sure that our members can get access to fair and affordable mortgage products. The market is a fickle place, and any regulation or law that creates added costs or barriers for purchasing in a community association could result in a shift away from the community association model of housing which has dominated the markets for the last 30 years. Such a result would harm all CAI members. The good news is that we have demonstrated that when we make our voices heard, we can shape the debate and achieve positive results in the face of big challenges.

As part of our ongoing Mortgage Matters Program, CAI is working to protect homeowners in community associations and to ensure access to fair and affordable mortgage products for all current and potential community association residents. You can follow our work and share your thoughts at www.caimortgagematters.org.

The Federal Housing Administration (FHA) has announced its plans to disqualify condominium associations from FHA financing if the association charges a deed-based transfer fee at time of sale. This would put FHA at odds with the Federal Housing Finance Agency (FHFA), which earlier this year determined that such fees benefit community associations and do not impact the sale of community association properties. It marks yet another unilateral action by FHA, without public notice or input that will have a detrimental effect on the condominium market. Worse, FHA conducted no formal release of this pending requirement, but rather mentioned it as part of a training session on the new requirements imposed by FHA in its June 30 Mortgagee Letter. 

Our members may recall the fierce, and successful, battle waged by CAI against FHFA on community association transfer fees earlier this year. In late 2010, FHFA proposed a draft regulation which would have cut off all federally backed mortgages to community associations with deed-based transfer fees.  A CAI national survey found that forty-nine percent of all community associations have a deed-based transfer fee. These community transfer fees are levied at the time of sale to fund reserves, capital projects or operations. The fees are typically less than $500 and are calculated as a percentage of sale price, a fixed fee or a multiple of monthly assessments. The challenge is that such fees are incorporated into the deed restrictions of the community association which typically requires a two-thirds majority of all property owners to change. FHFA sought input from the public at large and received more than 4,000 comments on their proposal. Based on the information received, FHFA revised their regulation to allow community association levied fees.

FHA has indicated that they will issue a Mortgagee Letter later this year which would disqualify condominium associations from FHA backed mortgages if they had a deed-based transfer fee in place. Unlike FHFA, FHA does not intend to solicit public input on this proposal nor do they find the information gathered by the FHFA on the same topic to be relevant to their decision. Unfortunately, this is business as usual for FHA which continues to issue requirements for its condominium mortgage insurance program without the benefit of input from the public at large. For those who have worked to get FHA approval, this has resulted in FHA requirements that have proven confusing and problematic for associations.  In a statement submitted to the House Financial Services Committee on an FHA hearing, CAI noted that FHA’s lack of stakeholder input “has resulted in underwriting criteria for condominium associations that do not comport with common association business operations, state law or common sense.”

In August, CAI members from key state legislative action committees met with members of the House Financial Services Committee to let them know the problems FHA is creating in the condominium marketplace by setting qualification criteria for condominium associations that conflict with association operations, state law or simply do not make rational sense. CAI continues to expand our grassroots efforts to force FHA to engage in a more transparent process in developing criteria for condominium mortgages. As FHA currently accounts for one in three condominium loans, getting the rules right is key to restoring confidence to the marketplace. Despite our progress on a variety of mortgage issues, FHA continues to be a needless source of confusion and frustration for condominium associations.

As part of our ongoing Mortgage Matters program, CAI is working to protect homeowners in community associations and to ensure access to fair and affordable mortgage products for all current and potential community association residents. You can follow our work and share your thoughts at www.caimortgagematters.org. CAI will continue to monitor and participate in shaping the development of the FHA’s condominium underwriting guidelines to ensure that the perspective of community associations is heard. If you have any questions about the FHA’s underwriting criteria and how it could affect your community, e-mail government@caionline.org with FHA Mortgage Insurance Requirements in the subject line.