Short Sale Buyer Can't Get Financing Due To Condo Assoc. More Than 15% Units Past Due

I have a file where I successfully obtained short sale approval.  Now, the problem is with the buyer obtaining a mortgage.  The condo association has more than 15% of their units behind in dues.  Apparently, FHA guidelines have poured over into the conventional with regard to this matter.  I am attempting to contact the short sale lender, BOA, to see if they will lend.  I may not have the correct contact for such.  Does anyone have a name and number for someone at BOA that can comprehend this ordeal and offer a solution?The buyer was going to get an FHA loan, but also have 20% and willing to get a conventional loan.  This short sale is behind almost $3K and will be paid at closing.  What a shame for this to be the deal breaker and add to the halt of selling any more condos in this association, except for cash of course.

 

Thank you!

Kristy

Short Sale Coordinator

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Permalink Reply by Kristy Hamilton on June 21, 2011 at 4:25pm
Still dealing with this.  Thank you for all of the feedback.  Yes, the BOA contact turned out to be a complete waste of time.  The latest news is that the buyer is working with Wells Fargo for possible financing.  I don't know if I am in the position to tell the listing agent to find a new buyer, or not.  I am the short sale negotiator and try hard to keep my distance on certain issues.  This issue was apparently discussed between the realtors early on.  But, they thought that the conventional option, due to the buyer's 20% dp, would overcome that issue.  They thought only FHA had those guidelines. What is really nuts about all of this is that it can't get any better for this condo development- it will only get worse. When you are dealing with condo developments where there aren't many units, the percentage is so easily affected by just one unit.  I am in Florida.
Permalink Reply by Carole Higgins on June 22, 2011 at 2:45am

I am not sure why Brian Avery says that Compass will pass on this deal...If you have at least 30% owner occupancy in the building/association  and the HOA has not burned through all of the reserve there should be no reason why they wouldn't do the deal.   The loan that I am suggesting is a portfolio product that I used to close 3 non-warrantables last year and at the beginning of this year.  All of the units were in the same 15 unit building, which, was a conversion project- it was formerly a commercial cold packing facility built in the 1930s and rehabbed/converted in 2006.  One unit was an REO and the other 2 were short sales all had back HOA dues of 2 years or more.  The bank paid to the cap on the REO- I think it's 6 or maybe 9 mos worth of HOA dues,  and we paid 50 or 60%of what was owed on the short sales. The HOA released their liens, the condos closed and all 3 owner occupants are happily ensconced in their new digs.  There are only a couple of caveats for this product- the unit has to be owner occed, and they won't loan on more than 25% of the entire project and obviously the borrowers have to be credit worthy.  This is the only program that I know of like this- Wells won't do it, US Bank won't and Key won't although all of these banks also have niche programs that can help you get certain types of buyers and/or certain types of properties to the table.  If you would like a contact at Compass give me a call @ 303-847-2577and I will give you contact info for the loan officers that I use, who may be able to do the deal for you depending on where you are located and if they can't I am sure they can find someone in your state at a Compass bank that can help

Good Luck!

C 

Permalink Reply by Joan Psarros, CDPE, CRS, SFR on June 22, 2011 at 7:57am

I just had a bit of good luck.  I got a cash offer on my condo shortsale that was going to be a problem with financing.  There are 16 units and one is past due.  They just sold one that was a foreclosed and therefore all the past due on that one was brought current.  So, my advise is we are going to need to get cash buyers until the government realizes they are going to need to talk with the banks about the problem that they are making with condos.  Another mess they are making by not getting buyers in that will pay.

 

Permalink Reply by Carole Higgins on June 22, 2011 at 11:25am

I am guessing that Brian is a mortgage broker. The program that I am referring to is not available through Compass wholesale lending.  The program is called Compass' CRA 97- it does work on non-warrantables but you have to go through a Compass bank lending officer.  I work with 2 of them here in Denver and they are able to work in lots of areas in the country so if you would like contact info to these guys I am happy to provide their contact info.

Good Luck-

C

Permalink Reply by Carole Higgins on June 22, 2011 at 2:56pm

Brian-

I suggest you call Andy Innhelder- 720-219-7447.  I don't know who you are talking to or what's going on but in terms of helping Kristy, which I think is where this began and not as a contest between the 2 of us I do know that I closed 3 non-warrantable condos in various stages of foreclosure with this program this year with Andy. And I do know the difference between non-warrantable and warrantable condos as I worked for many years for a condo developer.  Perhaps the answer would be more easily reached if the agents actually involved were to check in with Andy.  I spoke with him this afternoon to find out the name of the program and make sure it would work.  More than likely Andy can do the deal with them regardless of where the property and transaction is located and he assured me that if he couldn't for some reason he would find them a Compass Bank loan officer that could.   So again- I would encourage anyone that has financing issues on non-warrantable condos to call Andy.  Dealing directly with the retail division of a bank often opens opportunities that are not available through mortgage brokers who only have access to the wholesale division.  And point in fact I once had a buyer that I sent to a mortgage broker.  The broker packaged the loan up and submitted it to several different banks, including US Bank and it was declined.  I then sent him to my loan officer buddy at US Bank and by going through the retail division the guidlines are a bit more flexible- just enough that my buyer secured a 30 year fixed rate loan from US Bank which was one of the institutions that had declined it when it was presented to their wholesale division by a mortgage broker.  In this market I find ruthless determination is the name of the game

Cheers!

C

Brian Avery said:

Compass bank Home Care Advantage CRA 97 is part of their "Community Reinvestment Act" program. It is limited to certain neighborhoods and has income limitations. Although it is considered portfolio and can go outside of some FHA and Fannie guiedlines it is still a government program with guidelines in order to be insured and subsidized. Banks are not going to take on 97% loan to value loans without some type of guaranty. . It does also have its own collatteral guidelines as well. It does have HOA requirements.
Permalink Reply by Bryant Tutas on June 25, 2011 at 11:30pm
I'm going to place this in the newsletter today to see what kind of responses we can get.
Permalink Reply by Stephen B. McWilliam on June 26, 2011 at 5:07am
If this will be the Buyer's primary residence then you shouldn't have a problem with 25% downpayment; 30% downpayment is require for secondary financing.  Contact me if the Buyer has these funds for the downpayment and you're not having any success.
Permalink Reply by Stephen B. McWilliam on September 10, 2011 at 5:30am
done in error
Permalink Reply by Kristy Hamilton on September 9, 2011 at 3:38pm

What do you know?!  Buyer walked.  I tried to help the buyer's agent find financing for the buyer, but I think they had already decided to give up before thinking outside of the box to find lending.  Too bad that the condo associations couldn't figure out a way to include their dues in with the taxes, like CDD fees.   

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on September 10, 2011 at 3:49am

In Southern CA, I believe this is going to be the next HUGE issue for buyers and sellers.  Now, we may have historically low Interest rates, buyers willing to buy, good home values / prices and overall improved short sale processes, BUT one of the biggest hurdles we are now facing is Condo / HOA Associations with overwhelming delinquencies.  The number of Associations on the verge of Bankruptcy is increasing to the point they have to levy assessments to all units but only the homeowners who are already bearing the brunt can pay - so they get disgusted and stop paying too!  (Think about it, if there's an HOA with 130 homes and 120 are not paying HOA fees - that's a problem!)  I believe we're going to see a significant number of HOAs filing BK in the very near future which of course may or may not help the ability to obtain financing.

 

One of the biggest issues we face is financially distressed homeowners who have to hold onto every penny they have just to put food on the table for their families - or themselves!  With short sale lenders, for the most part, not paying past due HOA fees, this places the burden squarely on the Buyer (or the agents, but let's not go there).  Therefore, unless the Buyer is paying under market value for the property it is foolish for them to pay the past due HOA - there is no tax benefit or value added by paying the past due fees.

 

So is there a solution?  Last year I had a transaction where the seller was $20,000+ past due on HOA.  Luckily, the HOA was financially stable.  Of the 110 homes, only 2 were past due of any significance.  When we wrote the offer, we requested 3% in seller-paid closing costs (about $24,000) to be used specifically to clear up any SELLER past due HOA which would be paid by the buyer at closing - written into the offer in this way.  It worked!

 

This was a BofA 1st and Chase (collections) 2nd,  BofA approved the Seller-paid contribution to Buyer closing costs from the proceeds (more of a loss for BofA but cleared the HOA issue) and we closed.  Of course this is a readers digest version because there were other issues with the unrecorded Chase 2nd, but that's another story.....

 

The point is, there are ways to resolve HOA delinquencies but the lenders have to participate in the resolution.  If teh bank takes the property in Foreclosure, the HOA fees are typically paid by the lender so why not pay it when there's a short sale.  I believe, with the economy the way it is, lenders should begin to escrow for HOA similar to taxes and insurance until the economy turns around and worries have past.

 

Just my .02,

 

Thom Colby

Broker

Newport Beach CA

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on September 10, 2011 at 4:24am

Harry - exactly right.  Classic Supply and Demand - no demand, lots of supply (well, at least teaser supply with unbelievably low rates - 30 year fixed, under 4%) previously unheard of.

Permalink Reply by Kimberley Kelly on September 11, 2011 at 1:16am
This is a very smart idea Thom..I will use it if needed.  Thanks-

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