Can the HOA refuse to sign the subordination letter on a home I'm trying refinance?

Asked by Robert, Cedar Park, TX Wed Jan 21, 2009

I am currently trying to refinance my home and the HOA is refusing to sign the subordination letter. They required us to pay them $395 up front. This is a Conventional loan and we’ve been in the home for 2 years without any issues. Their request keep changing to even include what my interest rate is. What Is this Legal?

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T.E. & Naima…, Agent, Dallas, TX
Wed Jan 21, 2009
Liens are effective according to their filing date. Since the covenants that created the HOA pre-date your original "first" mortgage, the HOA potentially could foreclose the property for non-payment of HOA fees and wipe out the your first mortgage loan. Since no lender will lend under such circumstances, the lender asks for the HOA to subordinate its prior claim on the property, if any.

Does the HOA have the right to refuse? They can demand a charge according to the by-laws, and they can demand that you bring your account current before agreeing to subordinate any liens. Both of these reasons are valid and commonplace.

Inquiring what your interest rate is not normally provided for in the CCRs. (It might be, but extremely doubtful.) Ask the person requesting the information where in the CCRs it says that you must disclose this. If it really is a rule, then talk to the board (not the management company) about changing that.

If you inspect your copy of the CCRs, you will probably (but not always) find a subordination clause about 8-10 pages into the document. This is usually incorporated to allow people to buy houses without getting a letter subordinating HOA liens every time a house is sold. If it's there, you can supply a copy of the documents to your lender so they won't need the letter at all. If it's not there, then you're back to asking for a letter.

HOAs often overstep their authority by demanding things like copies of leases for tenants. They do have a right to know if you have common facilities whom you have authorized to use those facilities, but they do not have a right to know the terms of the lease.
HOAs are run by people. They can be taught to do things properly, but most often we just grudgingly let them walk all over us. Their role is important, but they're not the neighborhood gods, despite their belief to the contrary.
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T.E. & Naima…, Agent, Dallas, TX
Wed Jan 21, 2009
I think they are asking you to pay for the resale certificate. The amount sounds about right. However, you shouldn't need it to refinance. Simply a letter saying that your dues are up to date should be sufficient IF your lender requires it.

None of their bizwax what interest rate you're getting, must be a nosy neighbor on the board.... Like Tom suggested, post the HOA info here.

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, ,
Wed Jan 21, 2009
Curious.... I would post the HOA info for all to see.
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Scott Godzyk, Agent, Manchester, NH
Wed Jan 21, 2009
Robert why are they asking you to pay $395? are you past due that amount? I have heard of some management companies charging a small fee for doing such but if their fee is $395 it is a complete rip off. You could try to contact a local real estate attorney and perhaps a letter from them will get the HOA moving. good luck working things out
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