Is your HOA under funding?

by sfishome on January 15, 2011

I’m not asking if your HOA is under fundED.  But whether or not your HOA is funding enough in this year’s budget.  Fannie Mae changed conventional loan guidelines over a year ago requiring 10% of the HOA’s income to go towards Reserves.  I found this out when, as President of my HOA here in San Francisco, an owner called our Property Management firm to complain that he could not refinance because we were only sending about 8% to Reserves.  That was the first I heard of it.  In San Francisco we have tiny 2-unit HOA’s and large hundreds of unit HOA’s and my building was a 24 unit residential building.  So I don’t know if this impacts all HOA’s or not – comment if you know.

Our Board of Directors agreed it was important enough issue to spring into action and amend our budget.  We did, and the owner in question was able to complete his refinance. 

I bring this up because I’m now on the other end.  A Buyer client of mine is trying to get a loan on a condo in a building that is only funding 7.7% toward Reserves.  This is a pretty similarly sized building to the one I helped change.  You would think by now that all Condo buildings would have heard about this – if anyone tried to get a conventional loan for a re-fi or purchase, they presumably would have run into this snag.  Well, these guys obviously haven’t gotten the message.  But now you have.

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