giffpalmaire, Home Buyer in Smyrna, NY

PUD loan denied because of no Law and ordinance insurance

Asked by giffpalmaire, Smyrna, NY Thu Jun 20, 2013

we have a loan - approved - ready to go to buy a home in a PUD. The problem is the HOA refused the Law and Ordinance insurance. Our bank (Chase) says it is a Fannie and Freddy requirement and have denied the loan until/unless the HOA buys the insurance. Help!!

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Linasofiag, Home Buyer, Sarasota, FL
Wed Oct 5, 2016
Where you able to solve the problem? I´m having the same situation now! Please help!
0 votes
Lynn Brock, Agent, Sarasota, FL
Thu Jun 20, 2013

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.

Best regards,

Lynn Brock
Brock Realty Inc.
0 votes
The agents found out that the L&O coverage would be $17,000 per year. The insurance we would get for our unit was covered. According to the FL laws we've been able to see, the HOA has the right to refuse to purchase the insurance (although they have to sign a paper stating it was offered and they refused) but no lender will loan the money to a condo or PUD without the L&O because it is a federal requirement. Chase Bank has implemented it - several other banks have not - but we had a locked in rate 3.6% - which we would no longer get if we try an end-run with a new lender. The realtors are BOTH working on this and - in fact, we did have the letter of commitment from Chase. The closing was due for 6/18 - until the underwriter realized the absence of the L&O coverage and refused to release the loan.
Flag Thu Jun 20, 2013
Tammy Hayes, Agent, Port Charlotte, FL
Thu Jun 20, 2013
Contact a local Real Estate Attorney to see if anything can be done.

Tammy Hayes, Realtor
RE/MAX Palm Realty
0 votes
Brian McGree…, Agent, Sarasota, FL
Thu Jun 20, 2013
What does your agent say? Ask him if other buyers are having the same issue and how it was resolved, assuming it was resolved.

Five Year Winner - Five Star Award- Best in Client Satisfaction
Sarasota Home Realty
2100 Constitution Boulevard
Sarasota, FL 34231

Phone: (941) 544-6763 FAX: (941) 866-7588
0 votes
Our agent got information from the mortgage broker who works with Coldwell Banker that this is a fannie/freddy regulation. Not all lenders are following it yet but eventually they will have to. We have a locked in rate of 3.6%. There are (supposedly) lenders who can bypass that regulation but I honestly don't know how and we wouldn't get the rate. And, sooner or later, this HOA will have to buy the insurance because they definitely ARE a PUD. Thanks!
Flag Thu Jun 20, 2013
Jim Simms, Mortgage Broker Or Lender, Louisville, KY
Thu Jun 20, 2013
What I tell my clients, “If you must fight to get in, wait until you try and sell.”

Jim Simms
NMLS # 6395
Financing Kentucky One Home at a Time
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0 votes
Leeann Willo…, Agent, Sarasota, FL
Thu Jun 20, 2013
Contact a Real Estate attorney and make sure the property is actually in a PUD. In my neighborhood many of the mortgages are given as if it were a PUD but it isn't.
0 votes
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