loft downtown with HOA delinquincies

Asked by Lb, Los Angeles, CA Fri Jun 6, 2008

I have a contract on a loft downtown in a 140 unit condo. I am using a CalFHa loan and a HiCap down payment assistance. I was set to close and at the last minute my loan company says that the building is showing 22% delinquencies in the HOA. They said because that number is bigger than the 15% that Fannie Mae allows the loan cannot close (and no other bank could either). The HOA says that they are not in debt, have reserves and makes money in other ways so they are not worried about the delinquencies. Plus, most of that money comes from the 8 foreclosures in the building. My loan company is small and sells everything to Fannie Mae so I don’t know if they can get around this. My question is… can anyone get around this? Should I find a bigger lender? Does everything have to conform to Fannie Mae guidelines? If I go with a new lender do I have any obligation to the old one? Do I have to pay for the appraisal even though they couldn’t do the loan?

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Shel-lee Dav…, Agent, Rolling Hills Estates, CA
Sat Jun 7, 2008

Purchasing a condo/townhouse/loft in today's lending climate can get a bit complicated. Not only does the lender look at your financial picture, they also look at the financial health of the development. In the long run, this offers you greater protection. HOA's who have problems collecting their dues can later run into problems in meeting their financial obligations, and this might result in a large assessment on the individual homeowners in the development. This is a concern to your lender.

Regarding your obligation to your lender, there is no obligation, especially if he is unable to get you the loan you need. Regarding the appraisal, since you paid for it, you own it. If the appraiser is on the accepted list of the next lender you work with, they will be able to transfer the appraisal.

Two final notes. (1) Since you are using CalFHA and HiCap, it sounds like you are a first time homebuyer. These programs are extremely strict on making sure you, the homeowner to be, does not get themselves into a development were the HOA could go bankrupt or need to make special assessments. If the HOA does indeed have significant reserves, perhaps your lender can try to get the deal manually underwritten. Unfortunately, there are not many lenders who know how to do that. I would be happy to refer one to you. I specialize in working with 1st Time Homebuyers and know a lender who has successfully closed loans no one else could. Contact me if you would like this referral.

(2) You might want to look into lofts that are still being sold by the developer. Many of these developers are currently offering big incentives (I know of one giving a $50,000 buyer incentive at this time) and have their own deals cut with lenders so they do not have to worry about the FHA guidelines on occupancy and HOA collections. I would be happy to give you more information on this pathway, if it is of interest to you.

Best of luck in finding your perfect home at the perfect price and Dare to Dream.

Shel-lee Davis
Real Estate Consultant
RE/MAX Palos Verdes Realty
1 vote
Monique and…, Agent, Beverly Hills, CA
Mon Jul 28, 2008
Hello LB,

I'm not sure if your loan has closed yet but many lender will share there appraisals if they are unable to close the loan. Other lenders do not have to go through Fannie Mae so you may have better luck elsewhere.


Monique Carrabba
The Reavis Group
Keller Williams Wilshire
0 votes
Dyanna, , California
Fri Jun 6, 2008
Hello LB. You might have to try to go with another lender, but chances are they won't be able to close it either. At this time, mostly everything has to conform to FHA guidelines. You can always try a broker that has conventional lending, that might be an easier path. As far as the appraisal fee, if you have an understanding that it should be paid when the deal closes, then you might not be liable for that fee. You do not have an obligation to a lender if they can not close your deal. This is a business transaction and if you explain to them that you need to close this deal, I am sure they will understand.
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