Will Our Community Association or Timeshare Qualify for a Loan?

https://www.hoalendingxchange.comMany traditional banks are ill-equipped to even accept a loan application from a community association, timeshare, homeowner’s association, or any other commonly owned interest group. While there are a variety of reasons that this is true, the reality is that lending to a well-qualified community association, timeshare, homeowner’s association, or any other commonly owned interest group is a sound business practice that led to the creation of HOALendingXchange.

Qualifying for a community association, timeshare, homeowner’s association, or any other commonly owned interest group loan is really not so different from the way in which a business qualifies for a business loan. The community association, timeshare, homeowner’s association, or any other commonly owned interest group needs to show an ability to repay the loan and demonstrate that it has the credentials to seek the loan on behalf of its members. Other factors, such as creditworthiness, length of time incorporated, size and value of property, etc. go into the final determination but, for the most part, there is a lending solution for every community association, timeshare, homeowner’s association, or any other commonly owned interest group.

Are you ready to secure your community association, timeshare, homeowner’s association, or any other commonly owned interest group loan? Simply fill out our inquiry form and get started today.

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Effects of Reverse Mortgages on Condos and HOAs

https://www.hoalendingxchange.comMany condominiums and HOAs are filled with units and homes that are financed with bank-held mortgages. Reverse Mortgages are available to home and condo unit owners over the age of 62 who would prefer to draw money from the equity in their home or condo unit. These mortgage owners can either take a lump sum or periodic payments from the equity in their home. The mortgage holder gets paid back when the home is sold or liquidated upon the death of the mortgage owner.

The Federal Housing Administration, better known as FHA, is the leading insurer of these mortgages. Banks prefer to offer mortgages to borrowers and real estate that is FHA approved as it means FHA is willing to guarantee some of the risk associated with making the loan. For this reason, FHA approval of the property being mortgaged is very important.

Condominium associations and HOAs are not required to apply for FHA certification. In fact, many voluntarily choose not to undergo FHA certification. There are many reasons for this but FHA certification requires a 10% minimum contribution to the association Reserve Fund and also has percentage of rental unit caps and other restrictions. Associations that forego FHA certification are effectively limiting their unit owners from receiving an FHA-backed Reverse Mortgage. Many unit owners are surprised when they learn that their condominium or HOA unit is not eligible for such a mortgage, especially when their units are paid off and they wish to access their equity. This can lead to outcry from unit owners that the association seek FHA certification.

One concern many HOAs and condominium associations have about Reverse Mortgages is how they can affect the association’s ability to collect delinquent common fees. Once the Reverse Mortgage is issued, it behaves like any other mortgage. The association’s lien on the unit can be superseded by the mortgage holder’s lien in the event of a foreclosure. This can lead to a prolonged foreclosure process in the event of a default. For this reason alone, some associations prefer to keep their association’s free of FHA certification, thus preventing the mortgage holder’s lien from ever getting in the way of the association’s right to foreclose on a delinquent unit owner.

The bottom line is that the decision to seek FHA approval lies strictly with the Board of Directors. Unit owners seeking Reverse Mortgages will not be successful without an FHA approval for the community association. Depending on the number of unit owners aged 62 and greater, the demand for Reverse Mortgages could increase at any HOA. Boards should be aware of the needs of the unit owners and take appropriate steps to meet those needs or be prepared to explain why they chose to ignore them. Reverse Mortgages have grown greatly in popularity over the past few years. If your community association isn’t already approved for such loans, there will likely be a need in the not too distant future.

The decision to seek or not seek FHA certification does not impact an association’s ability to borrow money on behalf of the association should the need arise. HOALendingXchange.com is the ultimate resource for community associations and HOAs seeking money. Get started with your own HOA loan by simply filling out the HOALendingXchange inquiry form and HOA loan experts will get busy preparing their very best HOA loan concepts for your consideration.

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The Best Loan for your Community Association

https://www.hoalendingxchange.comAs a banker specialized in the community association industry, I have paid close attention to the shifts of the banking industry since the beginning of the 2007 recession. The 2007 recession! Hmmmm… Has it ended yet?

One very significant point that the “man-on-the street” does not appreciate is the hyper level of new regulatory control that has been heaped upon banks since the beginning of the recession. As much of the “man-on-the-street” perspectives coalesce to; “a lot of Wall Street Bankers should have gone to jail”. The reality is that they did not. The government responded with enhanced bank regulations, which had the unintended consequence to restrict ease of access of capital to every-day people and businesses. Where does that leave you as a community association leader?

The bank regulators are formula driven versus being common sense driven.   They, as individuals, also are nearly impossible to discharge from their positions so they are not worried about making business mistakes. For efficiency reasons the regulators perceive to be accurate, the regulators are focusing on the bigger banks.   The bigger the bank, the more intense the regulatory oversight. A common perspective within the financial services industry is that the large banks have been privatized by the Federal government. Business decisions are being guided.

Enough of my whining and on to the answer for your community association. The point is that the platform for how banks operate has changed from how you have understood how they operate. Large banks have been interrupted due to regulatory inflexibility to operate in what one would consider as a “consumer service methodology”. I define a large bank as any bank over $5.0 Billion. A bank under that amount has been impacted by the regulatory environment but they still retain the “desire” to service the consumer. It has been my experience that banks over that level have largely capitulated to governmental demands.

So what is the best loan for your Community Association? It is likely a loan that is negotiated with a bank that is less than $5.0 Billion in Assets. It is a bank that is a member of Community Associations Institute (CAI) because they have decided to specialize in providing financing to this industry. The last and most important qualifier is skills. The first question that you need to ask the banker is: “How many years have you been a Community Association Specialized Lender?”   If their answer is 7 years or less, keep shopping…

Why is the year 2008 an important pivot point? The regulatory impact is the key. A banker entering any business activity guided by the hyperactive pressure of the government’s regulatory pressure since the recession does not actually understand the community association industry. They understand government control.

If you find a banker that has been active in the market more than 7 years, you have a community association lending hero. A person that has many years of skills honed by the growth years, survived the recession and been managing against the regulatory environment.

A lot of this conversation does not seem to address the article’s title. The point is that there is much more to a community association loan than the interest rate. It is my experience that Community Associations are notorious for gravitating to everything that is cheap for the exclusive reason that it is cheap. The reality is that “value” is what is important, not “cheapness”. Getting good service and good quality products at a fair price is Value. If you deal with banks with bankers that have not been in the industry prior to 2008, chances are that you not getting a proper value. The banker may not understand your business (Association). The bank will not likely be the lower cost. The bank will most importantly be the providing the best Terms & Conditions because they have “Lawyered –Up” per their regulator’s requirements. Negotiating the Terms & Conditions of loan is far more important than negotiating a ¼ % interest rate difference between one bank and another. Terms & Conditions can cost the Association far more than a minor interest rate deferential.

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The Future of HOA Lending

https://www.hoalendingxchange.comThe advance of technology and social media have allowed technology-based entities such as Lending Tree, Prosper, Lending Club and other so-called “Fin-Tech” companies to all but destroy the traditional bank lending model. These high-tech bank alternatives often give borrowers more affordable, desirable, and easy to obtain methods to borrow money, pay off debt, and more. They further add the element of convenience by putting their resources at the fingertips of anyone with access to a smartphone, tablet, or computer.

Meanwhile, condominium associations, cooperatives, timeshares, and other HOAs seeking loans have had to rely on the “old-fashioned” bank lending model to obtain HOA loans. It no longer makes sense to simply rely on the bank where you deposit association funds. It is irresponsible to seek a loan by simply working with a single sales representative just because you are familiar with him or her. Why not let technology remove the cumbersome burden of searching for an HOA loan? Why not avoid the mistake of poor results from conducting far too narrow a loan search?

The future of HOA lending is here! HOALendingXchange (https://hoalendingxchange.com) is bringing all of the power of technology to streamline the HOA loan inquiry process for all HOA borrowers. Using our system, borrowers complete one simple loan inquiry and then relax while lenders compete for their business. They receive the best loan concepts for them to evaluate and decide which lender to pursue for their HOA loan. Best of all, HOALendingXchange is FREE of charge to the borrower. It costs NOTHING for a borrower to use the system.

Here’s how it works. HOALendingXchange invites HOA lenders to review all loan inquiries that fit their lending parameters. In other words, lenders have told us what types of borrowers and loans they are interested in. Borrowers submit their HOA loan inquiry anonymously. All of the banks that match the borrowers request are alerted and then, anonymously, put forth their most competitive lending concept for the borrower to review. It all happens quickly because of the power of technology. Borrowers can expect to have lending concepts to review in just three business days!

Ready to get your next HOA loan? Want to learn more? Head over to https://hoalendingxchange.com and get started today. You’ll have the best HOA loan concepts ready to review in just three business days. Welcome to the future! Welcome to HOALendingXchange!

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The Vital Role of the Community Association Attorney

https://www.hoalendingxchange.comCommunity association attorneys play a vital role in the success of most condominiums and HOAs. Depending on the size of an association and the challenges it is facing, odds are pretty good that one or more attorneys are performing crucial work on behalf of the association. The work these professionals perform on behalf of the association is crucial to helping them maneuver the maze of legal challenges that vary from state to state.

Attorneys that specialize in the legal issues and challenges facing community associations are relatively abundant. The community association attorney is an important member of the management and advisory team and a vital asset to promoting a healthy and harmonious community for residents to enjoy. A quick review of any association’s covenant, declaration, by-laws, and rules and regulations documentation, gives a first-hand appreciation of how complex those documents can be. The community association attorney provides interpretation of those documents for the community and, when necessary, in a court of law. Entering into an HOA loan agreement with any lender will almost certainly require the services of a qualified community association attorney. He or she will even argue cases before the court when necessary and provide trusted guidance to the Board when called upon.

Since 1993, the Community Associations Institute has recognized excellence in the practice of Community Association Law. That is when the College of Community Association Lawyers, more commonly known as CCAL, was founded. Membership in CCAL is quite exclusive. Of the thousands of attorneys that practice community association law, less than 175 have been granted membership. You can learn more about the College of Community Association Lawyers at the CAI website – https://www.caionline.org/Advocacy/LegalArena/CCAL/Pages/default.aspx

As a matter of law, condominiums and HOAs are bound not only by federal but also state and local laws. Community association attorneys need to be familiar with laws on each of those levels as well as be able to interpret the association’s specific rules and by-laws. This is no easy task and one of the reasons that an association should choose an attorney with specific experience in this area of law to represent them. State laws addressing common interest communities have also been changing at a brisk pace over the past few years. A competent lawyer is needed for community associations to keep abreast of these laws and take advantage of those laws that change to enhance their community association governance practices.

If your community association is in need of an HOA loan, it is important that the association seek competent legal assistance. When your association is ready to seek extra funds for capital improvement projects or other reasons HOALendingXchange can help! Simply fill out our inquiry form and our HOA loan experts will get busy preparing their very best HOA loan concepts for your consideration.

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A Bright Future for Solar Energy in HOAs

https://www.hoalendingxchange.comAccording to the Institute for Energy Research, slightly less than 1% of U.S. electricity production comes from solar energy. However, as the industry gets more efficient at producing high quality, affordable solar panels, many HOAs are taking note at how this technology can save money, and in some cases, actually create an income stream.

Not surprisingly, Florida (the Sunshine State) has enacted laws that allow for homeowners to install solar collectors. Even if the HOA has rules to the contrary, the state law trumps those rules and sets the stage for HOA members to jump on the solar band wagon. While the initial cost of installation can be high, solar power users experience significant drops in their energy bills immediately. In some cases, enough power is generated that the electric meter runs backward and the solar collector user is able to sell energy back to the energy supplier!

Every year since 2006, the solar power industry has experienced exponential growth. As traditional fuel prices increase and production costs of solar panels decrease, the demand for solar power energy grows. The federal government has heavily funded research and development in this sector. Solar power companies are now poised to compete with more traditional power sources. In fact, many analysts believe that as solar energy becomes more readily available the energy industry as a whole may change. That change may come in the form of more affordable and more available energy.

Condominiums and HOAs are seeing some of these advantages already. California leads the country in solar panel installations, due in part to tax incentives. As mentioned earlier, Florida has many installations but actually trails New Jersey in East Coast installations. There have also been significant solar panel installations in Massachusetts, Pennsylvania, North Carolina, Nevada, Arizona, and Colorado.

It is only a matter of time before more states offer similar incentives and solar panel installations become the norm rather than the exception. Between the increasing costs of traditional power sources and the decreasing cost of solar panel installation, forward thinking community associations can take advantage of this alternative power source today and start saving money on power tomorrow.

Your community association may wish to make the move to solar power but lack the funds to invest in the upgrade. When your association is ready to seek extra funds for capital improvement projects or other reasons HOALendingXchange can help! Simply fill out our inquiry form and our HOA loan experts will get busy preparing their very best HOA loan concepts for your consideration.

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Getting a Good Yield While Maintaining Fiduciary Responsibility to Protect Association Assets

https://www.hoalendingxchange.comMaintain, protect, and enhance. That is the mantra of every well-meaning community association director in the country. Following the association’s rules and regulations, interpreting the covenant, practicing proper governance and more require dedication and commitment to best practices for community governance. What about best practices for the cash that the association has collected to protect itself from all of the expenses, known and unknown, which the association must bear? Following best practices in cash management is a challenge that even savvy volunteer leaders often leave to investment professionals to handle and for good reason.

Before banks, anyone who amassed a large sum of money was tempted to bury it in their backyard or sleep with it under their mattress. That strategy won’t work for your community association’s funds. In fact, a well-managed cash management program can actually help defray inflation and future expenses by allowing the association’s money to make money through proper investment. That’s where the skill and experience of an investment professional can help.

If you haven’t already done so, it is a good idea to search for an expert to help you navigate these financially tricky waters. For smaller associations with smaller amount of cash on hand and in reserve, it may be their local banker. For larger associations who may amass millions of dollars in reserves, it may mean working with a larger financial services firm who has a proven track record working with such substantial amounts of money and homeowners associations. Either way, there are some key considerations to take into account before investing the association’s money.

The financial institution that you work with should understand the needs of your community association. Condominiums and Homeowners Associations function closely to municipalities and often have the same needs. Instead of local taxes, they collect common fees. Instead of emergency services, they provide landscaping, insurances, common element maintenance, and such. They are typically not-for-profit corporations and typically behave as conservatively as possible from an investment standpoint.

Of course, security is paramount these days. You want assurance that the money is safe and cannot be easily stolen. Also, you want to know that there is insurance in place to protect the investment. If the amount becomes too large to insure, there are programs that help spread the risk and offer the highest level of protection possible. Ask your financial institution for the details on their security programs, especially if large sums of cash are involved.

FDIC coverage is important for Certificates of Deposit (CDs). These certificates generally assure a rate of return in excess of what a standard savings account would offer. Of course, there are rules and requirements to obtaining CDs but many associations find that CDs suit their needs just fine.

Higher rates of return are often available but they generally require higher rates of risk. Association Reserve Funds are not commonly subjected to risk as the monies collected represent common fee contributions by owners. However, if conservative investments in government bonds or similar low-risk derivatives are available, it is possible to invest some of the cash into low-risk investments that will yield higher returns. The potential return must be weighed against the risk before any association funds are invested.

The bottom line is that the association’s funds are its lifeblood. It must be treated with great conservation but must also be allowed to work for the association. A solid cash management program can accomplish both and bring a reasonable return to association members. Your condominium or HOA may also need funds in addition to what they already have on hand for capital improvement projects. HOALendingXchange can help! Simply fill out our inquiry form and our HOA loan experts will get busy preparing their very best HOA loan concepts for your consideration.

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Building Components: Technological Advancements Make Upgrades Worthwhile

https://www.hoalendingxchange.comWith technology advancements, replacing worn elements may be less effective than upgrading to new materials. For instance, wooden decks may look fantastic at a shore side condominium complex. It’s too bad they need to be replaced every 10 years. They just don’t hold up to the elements. Until recently, using wood to replace wood may have been the only option. Now, it is not uncommon for modern materials like plastics, amalgamations, and even recycled products like rubber from tires to be used to offer beautiful options with the benefit of longer life and lower cost of ownership.

There was a time when most condominiums were referred to as “brick and stick”, referring to a simple concrete foundation and wood infrastructure and building exteriors. Today, new materials are everywhere. From the ground up, technological advancements are making modern buildings more efficient and less expensive to maintain over time.

Concrete is still the foundation material of choice but even concrete has seen its share of technological advancement. Additionally, many folks look to finished basement systems to keep them dry and add extra living space. New buildings routinely make use of foundation space that was once relegated to basement storage in many older condominium buildings. Even materials such as steel and pressure treated wood are being used in modern foundations.

External building products like fiber cement are changing how buildings can protect themselves from the elements. They hold their finish longer and offer a 30-year non-prorated warranty. That’s something that wood just can’t do. With the increased damage inflicted by major storms, many communities are faced with the challenge of replacing what they lost. It is actually a perfect time to consider upgrading existing building materials to something more durable and more likely to withstand Mother Nature’s next attack.

Glass-based products like windows and sliding glass doors are constantly being replaced. While the most visible benefit is great looking windows and sliders, there have been vast technology improvements in materials and energy savings that often allow these upgrades to pay for themselves in just a few years time. The U.S. Department of Energy estimates that almost 30% of heating and cooling energy is lost due to inefficient windows and sliders.

Roofing materials have seen technology advancements as well. New materials offer longer warranties and lower cost of ownership over time. Solar electricity can also be a consideration next time the roof needs to be replaced. Solar shingles are not only durable but they can even provide an energy or revenue source for forward thinking common interest communities. Companies like Dow Solar have received millions of dollars from the U.S. Department of Energy to pioneer this technology which they make available to builders and remodelers to incorporate modern construction. Perhaps your next roof will make you money instead of costing you money!

The bottom line is that technology has advanced almost all components of building. Buildings that were fully modern just 20 years ago can experience huge performance improvements by replacing dated and worn building materials with modern, longer lasting, and energy efficient products. Old buildings can look great and perform better by taking advantage of these new building materials. Your condominium or HOA may wish to take advantage of these advances and need funds to do so. HOALendingXchange can help! Simply fill out our inquiry form and our HOA loan experts will get busy preparing their very best HOA loan concepts for your consideration.

 

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Is Deferred Maintenance Becoming a Crisis?

https://www.hoalendingxchange.comI recently was processing a loan application for $2.8 million for a Washington State condominium association of 66 units. The loan repayment was going to cause the Association’s regular monthly level income to triple. Not surprisingly, the Association responded that they could not afford such an increase. I appreciated that perspective and agreed. The sad part of the negotiation was that they still needed the funds in order to keep the property in a habitable condition. They were effectively looking for me to be a Genie and turn the Loan application into a Grant request. They were frantic because they were out of options.

I have been specialized in lending to community associations nationally for over 20 years. I have, in recent years, noted a concerning trend with loan applications. The loan requests have gone from funding the replacement of a single component such as a roof to becoming wholesale renovations of the respective buildings. The per-unit project costs have gone from an average of $2,500 to $25,000. The core issue is the underfunding of the Reserve Fund for easily determined future capital maintenance upgrades.

There are States that require, by law, community associations to have professionally prepared Reserve Studies and even require that the studies be updated periodically. The irony is that those proactive States do not require that Reserve funding indicated by the required Reserve Studies be fully funded. One of the States with the most rigorous set of regulations related to reserve studies is California. However, contradictory to logic, it is my most prolific market for loans due to excessive deferred maintenance of associations with inadequate reserves. The state wants the associations to know they are underfunded but they do not require that they solve the problem. What exactly is the point?

Reaffirming my anecdotal experience of excessive deferred maintenance is the number of loan applications that are due to a property being “Red Tagged”. This is something have I only been exposed to in the most recent five years. It is municipalities stepping forward and giving community associations formal notice that they have a specific date to get required repairs completed or the property will be condemned and must be immediately vacated. These types of circumstances do not come about overnight. Typically, there are warning notices issued over extended time periods. Yet, the Associations do not take the steps required. The dialog that ensues with me once these notices occur is that the unit owners cannot afford the repairs. Which is also to say that they could not afford the little bit of extra added to the monthly dues that would allow for building of cash reserves.    Effectively, the unit owners never could afford to live in the particular property that it is about to be taken from them.

In theory, loans for capital maintenance upgrades are not a product that should exist. There is no valid reason for a community association to be significantly under reserved. There is a very accurate and sophisticated system practiced by skilled and licensed professionals to generate life cycle analysis of community association components. The report generated is able to determine the estimated level of cash reserve needed at any point in time for the association to self-fund improvements. Special assessments should be limited to the potential differences in those estimates when actual repairs occur. The additional reality is that most people cannot afford to live in the units they currently occupy because they “claim” they cannot afford the projected future capital maintenance need that should be added to their monthly association dues.

 

There are 3 realities to living in a community association:

  1. The property will wear out.
  2. The improvement projects will not go away or become less expensive.
  3. The only place the funds to support the improvement projects will come from is the unit owners whether by building reserves, special assessments or loan payments.

 

It is my perception based on the ever-expanding problem. In the near future, regulatory agencies such as FHA, the insurance industry or the mortgage industry are going to inject themselves into the problem and require proper levels of reserves. Community associations are not likely to solve this pervasive problem themselves.

 

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Delinquency and the HOA

https://www.hoalendingxchange.comThe timely collection of fees and assessments is the lifeblood of any HOA, condominium association, co-operative, or timeshare. However, unit owners are not always able to pay their fees and assessments on time. Depending on the state you live in and the penalties for late payments ascribed in the governing documents, delinquency is handled in one a few different methods. This article describes some of the best practices common interest community associations can use to keep their delinquencies to a minimum and their collection efforts on track to keep the revenue flowing while the delinquency is remedied.

Most HOAs have rules about when payments are late and what steps the association should take to collect delinquent funds. Consult with your association’s governance documents to see how delinquencies are handled at your HOA. If the documents are silent or the penalties are not strong enough to encourage compliance, it may be time for new rules and a document revision to help ensure that there are adequate penalties and remedies in place for late payments. Generally speaking, a fine ($25 or so) is imposed for payments that are 10 days or more in arrears. Additionally, there are collection efforts at 30, 60, and/or 90 day intervals when payments are missed.

At 30 days, a letter of demand is usually issued. This letter details the delinquency, reaffirms the fine that went out 10 days after the payment was missed and details what further collection activities await if the payment is not made in timely fashion. At 60 days, the matter is generally turned over to the association’s attorney or collection agent for legal proceedings. The legal costs are generally paid by the association and assessed to the delinquent unit owner as outlined in the association’s governing documents. The simple desire to avoid all of these additional costs is usually enough incentive for the unit owner to make good on the debt at this time. The addition of the attorney’s fees on top of the unpaid common fees and fine really drive up the debt. It is not uncommon for these fees to top $500 or more depending on the part of the country you live.

Finally, if the delinquent unit owner is unable or unwilling to pay the delinquent fees, the association can begin foreclosure proceedings against the unit owner. Again, laws vary from state to state but, generally speaking, delinquency can be remedied via foreclosure action, although unit owners have very specific rights from state to state. That is why it is best for associations to work closely with legal counsel during this phase of collection procedures. Laws also vary from state to state about the right of priority (who gets paid first) when foreclosure occurs as there are usually multiple claimants in the foreclosure proceeding. It is a drastic and final measure for just this reason.

There are times when HOAs, condominiums, timeshares, and cooperatives simply need more money than they have collected for capital improvement projects that are needed. HOALendingXchange.com is the easy choice for community associations and HOAs seeking money. Getting started with your own HOA loan is easy. Simply fill out the HOALendingXchange inquiry form and HOA loan experts will get busy preparing their very best HOA loan concepts for your consideration.

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