1.) This situation seems to have been unforseen during your inspection period, it could, however, be construed as part of your due diligence. Your agent needs to get busy in conjuction with your mortgage representative and research to determine what solutions are available and acceptable to underwriting.
2.) Are there other properties financed in this project? Have your agent find out which lenders have financed these properties. Check with local community banks, they fall under different lending regulations and can provide a portfolio loan.
3.) If the loan has been denied, then you can cancel the transaction and secure your escrow deposit back.
4.) It sounds as if your agent was not on top of the financing status and underwriting requested criteria. In today's real estate market it is essential that the buyer's agent and buyer's mortgage rep communicate continually throughout the process.
5.) Have your agent find out the cost of the Law and Ordinance insurance and offer to pay for the policy as a part of your closing costs. Your comments indicate that the association was not interested per the cost.
6.) Have your agent check with the State regulatory agency to determine if the Law and Ordinance insurance coverage is required?
A denied loan file = a dead deal.
Someone dropped the ball in researching the parameters of the loan criteria and the loanability of the subdivision. It really comes back to the buyer's agent. Get with the agent's broker and see if their experience can lend support with finding a solution regarding this matter.
Brock Realty Inc.