As part of the approval process, condominium associations are required to provide lenders with recorded copies of the condominium's legal documents, including the Declaration. As such, it is important that you have a recorded copy of all condominium documents. If necessary, your association's legal counsel can assist you in obtaining a recorded copy.
In addition, there are more specific requirements which condominiums must meet in order to be eligible for FHA mortgage insurance, including, among other things:
- no more than 15% of the total units in the condominium may be more than 30 days delinquent in the payment of assessments;
- the association's budget must provide for the allotment of funds in a specific manner, including devoting a minimum of 10% of the entire budget to reserves; and
- any condominium with more than 20 units must maintain fidelity bonds or insurance to cover directors, officers and any other persons who are responsible for handling the association's funds in an amount equal to three months total assessments on all units plus the total amount of reserve funds.
The current provisions of your association's governing documents may conflict with the new budgeting and insurance requirements and any issues with delinquent accounts could negatively impact upon the condominium's eligibility for FHA approval. You may wish to consider having your documents and current delinquency policy reviewed by your association's legal counsel to address any potential problems which could prevent your condominium association from obtaining or keeping its FHA mortgage insurance approval.
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