Hello Stephanie and thanks for your post.
Once the community has been built and there are homeowners within the buildings, it is usually close to impossible to get the entire community approved for financing by FHA. The reason is that its usually pretty difficult to get occupancy, delinquencies and reserves to the levels necessary to meet FHA rigorous guidelines. There are some mortgage brokers skilled enough (and I suspect Michael Wallace is one of those brokers) who can get a spot FHA approval to allow for a home sale to a buyer who must use FHA loan.
I find it interesting, however, that so many home owners and those representing homeowners associations cite FHA buyers as the reason for delinquencies, foreclosures, government bailouts, etc. All of these comments are either incorrect or unsupported.
As Jon stated below, most of the defaults of late have been with those homeowners who purchased using "conventional" financing that is either sold or guaranteed by Fannie Mae and Freddie Mac. This is the reason that both Fannie and Freddie almost went bankrupt--so many of their loans were defaulting, that the entities could not cover the losses. J, the government's own "bailout" plans for mortgage holders affected only conventional buyers (those with Fannie loans) and never once provided guarantees or help to those buying with an FHA loan or who currently have an FHA loan. And many, Presidet Joe, of those defaulting now had as much as 20 percent equity in the home before the market fell, so the 20 percent down payment has not slowed the rate of short sale or foreclosure transactions.
As for FHA's loan programs--it is not a program intended to help indigent Americans; it provides funding to those who are new to the home market, and may not yet have accumulated funds for a down payment. It was NOT intended to help those who are or were unqualified to purchase a home, suddenly be able to buy a home. At present, only those home buyers who have not owned a home in more than one year, who have a FICO mid score of at least 620 (for low balance) or 660 (for a high balance) can qualify. FHA checks income visa a vis two years of certified tax results from the IRS, and they also make certain the property being purchased is, indeed suitable for habitation. Also--and this should not be overlooked--FHA loans do not have to comply with HVCC appraisal rules, so the home values are proving to go up slightly with an FHA appraisal versus an appraisal for a conventional loan due to the more rigorous requirements of HVCC and the 'trending" element required for all valuations under these new rules. So there are plenty of reasons to look to FHA buyers with fresh, and hopefully, open minds.
Finally, I find it interesting--as an Association Manager--that anyone would claim that the Board or Association knows who has an FHA loan and who does not. In fact, neither the Association Manager nor the Board of Directors is ever provided with this information, so we cannot tell if the person who just defaulted on their loan (and their homeowners association assessments) bought the house with a Fannie backed or FHA backed loan. So while I'm certain President Joe feels that FHA buyers have been the bain of the Association's financial and operational woes, the truth is--because we are never told who is backing the loan--Joe's comments are strictly speculation and he cannot prove it unless he's checked the loans of each of the buyers. Even in default, we are not told who guaranteed the loan--only that the name of the bank holding the mortgage. So while I am certainly not trying to belittle President Joe's angst over their Association's problems, I know that defaults and homeowners issues come wrapped both in an FHA purchaser as well as a conventional loan purchaser blanket.
I think, in order to truly have a discussion about the merits of the FHA loan program or whether a community should look to FHA, it's probably in the Association's best interest to consult a qualified and educated loan broker to help divine fact from fiction, or, in this case, misconception. You can start with Michael Wallace on this site, and if he cannot help you, I'm certain he can find someone in your area who can assist the Board and your members in having a fruitful and frank discussion in this matter.
Grace Morioka, SRES, e-Pro, CID Expert/Consultant
Area Pro Realty
San Jose, CA