The Challenges of FHA Certification
While it is definitely beneficial for homeowners associations to be FHA certified, the process has proven itself to be full of challenges…to put it delicately. Offering this certification and recertification service for our HOAs (and any condominium association for that matter) is something we are proud of and enjoy doing, but boy-oh-boy, are there hurdles to overcome prior to getting that glimmering letter of approval.
To start, allow me to explain what FHA certification is. It is not for these purposes a loan, it is certainly not a grant, but rather, it’s a promise. A promise from the federal government to new homeowners that the mortgage rates they agree to will remain that way without any unexpected swings or increases. This mortgage insurance is very attractive to prospective buyers who, without such a guarantee, might not be able to purchase a home. For this reason, it is highly advantageous for HOAs to be FHA certified. The thing is FHA certification expires. With all that goes on in a typical homeowners association, the two year period in which the association is certified might seem to fly by very quickly leaving the HOA needing to reapply for certification. Recertification is no easy task.
These applications are highly demanding and an extensive amount of work is needed to complete them. Collecting this information sometimes has its challenges, such as tracking down those bylaws signed decades ago, but in itself is only half of the process. Oftentimes, and by that I mean usually, the US Department of Housing and Urban Development (HUD), the agency responsible for all things FHA, will reject an application based on the smallest deviation from their very strict guidelines. Resolving these issues and reapplying with the highest attention to detail possible is the true challenge.
In my experience as CAP Management’s FHA technician, all of the applications I have submitted were rejected initially. I was able to resolve each one of them, but after a whole lot of additional work. The positive thing is that HUD will *generally* let you know exactly what needs to be corrected to satisfy their very particular demands. Often, this will relate to insurance coverage. Just this week I have had issues with applications for three different HOAs because of their insufficient fidelity bond (crime) coverage. Another highly scrutinized topic is in regards to HOA financials. Even the slightest disparity in the figures results in rejection.
As I had mentioned, these rejections can be corrected per HUD’s reconsideration policy, but only if you provide 100% of the information they seek. What if you have questions about what is specifically required? What if you are unsure about a particular detail? Good luck seeking resolution! The only way to get in contact with the office that rejected your application is to call the national FHA hotline and hope that they will successfully relay your inquiry to the appropriate individual in the correct office. The location in which they review these applications, I feel, is slightly questionable. They have an office right in downtown Denver, but for associations in the Denver metropolitan area, applications are often reviewed in Philadelphia. Nonsense!
At the end of it all, the process, as demanding as it is, really is not that bad. It is certainly tricky at times, but the results of it are well worth the work as it makes great housing available to young families and other folks that otherwise might not invest in our communities. With this in mind, we urge all condominium associations to pursue FHA certification. We can help! Though it is not always an easy job, we have always had the best results in the end. Give me, Alex Bergeron, a call or shoot me an email if you’d like to find out how we can use FHA to increase the desirability of your HOA. I can be reached at 303.832.2971 ext. 102 or AlexB@capmanagement.com. Thanks for reading!