The Fair Housing Association or FHA has many rules regarding condominiums, and recent changes in the laws have left some boards confused about what is required of them under federal law. You should know that an FHA reserve study is required by law, and your state may have more stringent requirements. The best way to find out about the requirements in your area is to get in touch with an experienced architectural engineering firm like J. Hershey Architecture. You can have your FHA reserve study conducted and get advice on the best way to manage your Homeowner’s Association, or HOA, reserve funds.
Aside from legal requirements, it is a smart idea to get your FHA reserve study done for other reasons. A capital reserve study will tell you exactly what kind of wear and tear the common areas of your co-op or condominium are experiencing. Not only that, but your FHA reserve study will lay out a time frame for budgeting for these repairs and let you know exactly how much you’ll need to have on hand and when. Needless to say, there are lots of good tips in your study about how to handle your HOA reserve funds.
An architectural engineer will conduct the FHA reserve study by studying all the areas of your co-op or condominium that require repair at certain intervals, like roofing or roadways, or even replacement. Typically, a reserve study will not focus on things that are not supposed to need maintenance, like building structure, or things that require regular, routine maintenance, like landscaping. This is what the reserve study is not the end all and be all of your HOA reserve funds management practices. You always need to make sure you have money in your HOA reserve funds for unexpected expenses and emergencies. There are very definite risks when it comes to underfunding your reserves.
You need an architectural engineering firm that understands your unique needs and takes into account your community when conducting its survey. Every community is different and has different HOA reserve funds needs. By working with J. Hershey Architecture, you can be certain that the particular needs of your community will be balanced with the needs of the board, leaving everyone happy and well taken care of in the long run. Don’t make the mistake of trying to budget without truly
understanding your reserve study. Rely on professional analysis to ensure that your financial future can be stable and sound.
We provides high quality HOA, Capital, condominium association and fha reserve study for properties situated in Libertyville and throughout the Illinois.
Garrett Bill Aims to Protect Taxpayers from Another Bailout
Projected FHA Loan Default Rate at 20%
Rep. Scott Garretts (R-NJ) legislation to require borrowers under Federal Housing Administration (FHA)-insured mortgages to make down payments of at least 5% continues to make news, especially as new statistics emerge about FHA loan default rates.
Garretts bill, the FHA Taxpayer Protection Act of 2009 is aimed at shielding taxpayers from the risk that the FHA portfolio presents. In addition to the 5% down payment requirement, an increase from the current required rate of 3.5%, Garretts legislation would also prohibit financing of closing costs under such mortgages, and require a Government Accountability Office (GAO) study of FHA fiscal soundness. In the Housing and Economic Recovery Act (HERA), Congress set the FHA down payment requirement at 3.5% and allowed closing costs to be included as part of that number. This effectively allowed FHA down payment levels to be as low as 2.5%.
Homeownership is a noble goal, Garrett said. However, the benefits of promoting homeownership using government subsidies must be balanced against the potential risk of insuring less creditworthy borrowers and exposing the American taxpayer to that risk. As we have learned repeatedly throughout the mortgage crisis, the amount of equity a homeowner has in their home directly correlates to the credit risk associated to their mortgage. In trying to find a reasonable balance between the current, extraordinarily low level and a level that would ensure a significant reduction of risk to the taxpayer, I am introducing legislation to increase the FHA down payment requirement to 5%.
Appearing before the House Financial Services Committee, Federal Reserve Chairman Ben Bernanke, stated, Given the low down payments, there is greater risk of loss there, which will be borne by the taxpayer. By raising the down payment requirement to 5% and studying the challenges presented by the increased leverage ratio, Garrett believes Congress can begin to address the main concerns with the solvency concerns of the FHA.
The proposed GAO study would attempt to determine the current fiscal state of the FHA, the appropriate capital ratio that should be maintained in order to ensure financial soundness, the effect of the capital ratio on mortgage insurance programs and the exposure of the taxpayers as a result of obligations of the FHA, the effect of the capital ratio of the FHA on the broader housing market, and the extent of the increase in which housing markets are dependent on mortgage insurance provided through FHA since the beginning of the financial crisis.
Many have expressed concern with the risk the FHA poses to taxpayers, especially with the recent disclosure by FHA Commissioner David Stevens that the capital ratio of a key reserve fund dropped below the 2% Congressionally-mandated level. The risk to the taxpayer is real, as Office of Management and Budget (OMB) Director Peter Orszag noted when he observed that FHA loans have accrued billion in losses over recent years. Orszag also dispelled FHA claims that the agency costs the taxpayers nothing by stating, Over the past few years, the program has been anything but costless.
Inspector General Kenneth Donohue outlined the growth in FHA market share from 3% in 2006 to over 20% in 2009, stating, the current degree of FHA predominance in the market in unparalleled. This growth in market share is especially troubling considering the increased rate of delinquency for FHA loans, which is now over 14%.