Many Association governing documents
require the HOA to conform with FHA/VA lending guidelines. A high number of
rentals or excessive delinquencies may prevent a condominium qualification. Whether or not an Association can qualify, is
it a fiduciary duty for the Board to apply for the certification? Lack of certification reduces the pool of
eligible buyers, impacting sales, and possibly conflicting with the Board’s
duty to enhance and protect property values.
It may be argued that the Board chooses
to not seek FHA approval because they don’t want the higher risk of
foreclosures, which drive down property values:
FHA borrowers do not provide large down payments and qualify under lower
credit scores, raising the risk of loan default. The Board’s position could be viewed as
protecting the value of the community, or a blatant attempt to ban
“undesirables”.
Although the
Association may argue that it is the lender discriminating (the Association
does not have direct knowledge of a borrower’s status or circumstances), the
Fair Housing law operates under a concept of “disparate impact”. This provision prohibits actions/policies
that unintentionally impact certain protected groups. Institutions are placed in the position of
being guilty until proving themselves innocent, a long and expensive process.
A federal
official of the Justice Department has stated the agency is the guardian of the
Fair Housing act. Recently, the Justice
Department agreed to not pursue whistleblower cases against the city of St.
Paul, Minnesota. In exchange, the city
agreed to drop a suit that the U.S. Supreme Court had already agreed to hear,
that would have gutted the “disparate impact” portion of the Fair Housing
act. Having local taxpayers suffer a
$200 million loss by not defending the whistleblowers was deemed acceptable
collateral damage.
Nice and useful post for me. I want to sale my Midtown condominiums but I can't find a good customer please suggest me.
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