Thursday, August 19, 2010


Ok, so it used to be that if you qualified for an FHA loan and wanted to buy a condo, the lender performed a "spot check" on the condo, meaning they looked only at the unit: market value, any outstanding assessments, etc.

This year (February, in fact), faced with so many condo associations facing serious financial crisis, the FHA decided that it would now require entire condo associations to be FHA approved in order for anyone to buy a unit therein with an FHA loan. The approval process looked at the financial stability of the association: as well as factors the lend itself to a stable association, it capped the percentage of rentals allowable under approval, and the percentage of ownership allowable for any one individual.

These rules make a lot of sense; in effect, the FHA is recognizing that an individual condo unit is affected by the entire association's financial stability and ownership practices, and I frankly wonder why they didn't do this sooner. My condo association is in the process of signing a contract with a new property manager, who will help us get this approval. Mot lenders follow FHA guidelines.


I also own half of a condo in Boston. About ten years ago, a friend and I bought a triple-decker and converted it to condos: she owned one unit, I another, and we owned the third jointly, and rented it out. the rental has no mortgage.  I sold my unit when I moved to Chicago. Given the amount of upkeep required of a 100-year -old house (we've had to deal with a leaky basement to the tune of $7K, and just last month had to replace the roof to $12K - thank God we were prudent and put away reserves aggressively), it's not what you'd call a money maker. Concerned that my recession-imperiled financial state would make it impossible for me to absorb another large repair, I asked my friend about buying me out. She agreed.

We agreed on the price, on terms. She researched the transaction fee, and it was all going smoothly. Then she approached lenders, and we came up against our dilemma: With her unit and half of this one, she owns 50% of the association. If she buys me out, she owns 2/3 of the association. FHA has exceptions for small associations like ours, but it does not permit this much ownership by one person even in this circumstance.

So lenders won't let her take out cash to refinance and buy me out. Again, she will only leverage 50% of the place's value, so it's not like she's getting a loan against most of the place. But no. She's looking into lenders that manage their own portfolios (rather than sell them), but it's slow going and it doesn't look good. So the upshot is that while I sit here drowning in an under-paying job and racking up credit-card debt on veterinary bills, I have about $80K worth of asset that I can't liquidate.  How crazy is that?


SP said...

You should write a letter to Oprah.

JC said...

I'm so over Oprah.

karen said...

sometimes the rules just suck, eh?

I'm over Oprah too. The beginning of the end of my personal love affair with her occurred when she pulled that wagon of fat onstage with her smaller self. But the final nail was when I heard her tell somebody to get therapy and then bragged that she's never done any herself. Seriously?! That screams ISSUES on so many levels.

JC said...

I remember watching a program where her guests were women who had escaped one of those sick Utah religious sects where 15-year-old girls were being married off to old men. She broke for a commercial about every 45 seconds, and I thought, "these women are showing incredible courage coming on your show, and you have to keep interrupting them for weight-loss and detergent commercials?" It was crap. And yes, I love people who sneer at therapy and antidepressants. I let them go on about it and then smile brightly and said, "I've done both!" "But you're so together!" "EXACTLY."