“Many condo management companies now charge prospective buyers and sellers excessive fees of hundreds or thousands of dollars for providing condo documents that should be free for the selling unit owners to provide through their broker,” noted Sara Benson, president of Association Evaluation, LLC.

Launched in 2012, the Chicago-based real estate data analysis and technology firm developed the Private Association Rating, or PARScore, which provides a standardized high-tech condominium association rating between 400 and 900 via a data-driven proprietary algorithm. Every PARScore report includes a site evaluation of the common areas by a certified association evaluation professional plus a review of the association documents.

Documents necessary for a real estate buyer to review before committing to a purchase include the declaration – or covenants, conditions and restrictions – bylaws, house rules, regulations, board meeting minutes, state mandated disclosures, prior and current year budgets, and the reserve study.

“Doc fees can range from $50 to $250 per document, so the price can really add up depending on the number of documents requested,” said Benson (right). “On average, fees run approximately $500 for electronic delivery for a complete set needed for a condominium sales transaction.”

Reviewing condo documents is critical, consumer advocates say, because buyers need to know well in advance if the association being bought into is on the brink of bankruptcy or fiscally fit and a sound investment.

“You wouldn’t want to get hit with that $50,000 special assessment six months after the closing, would you?” Benson asked.

Most governing instruments and state statutes were created long before online delivery was a possibility, consumer advocates note. They allow for a “reasonable cost” of copying association-related documents.

However, in the age of the Internet, association documents are often stored electronically and can be shared with a simple click of a mouse. There are no paper, ink, or shipping costs. There is no manpower time associated with copying documents and sending them to the buyer by USPS or FedEx.

“Despite this, many management companies – and some boards – are using the documents as a literal profit center,” Benson said. “These are new expenses conjured up by property managers, charging fees for materials that are owned by the sellers or documents that are a public record.”

“Realtors and condo buyers and sellers are beginning to wonder if this is a ‘reasonable cost’ when delivery is paperless.”

Benson recently formed a Broker Advisory Board that is dedicated to improving the lives of current and future residents in association-governed communities by fostering transparency, accountability, credibility, and best practice governance in community associations nationwide.

Several members of the advisory board strongly questioned the ethics of the relatively new practice of some management companies to market condominium documents to buyers and sellers, creating a lucrative income stream for the management firm while representing a not-for-profit condo association.

Housing advocates find it surprising and of great consumer concern that the media is not scrutinizing the practice of management companies charging upfront fees for providing the documents and disclosures, and then charging a second fee for the property transfer at the back end of the transaction.

This practice likely is a violation of the Fair Housing Act because the fees amount to hundreds, perhaps thousands, of dollars. This affects affordability and that can be discriminatory.

If these hefty condo and homeowner association fees are tacked onto the closing statement required by the Real Estate Settlement Procedures Act, shouldn’t management companies be subject to all of its provisions?

For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.

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A new national survey by the Coalition for Community Housing Policy in the Public Interest (CHPPI), has found that 81% of community association residents surveyed feel that “lack of transparency” and “poor communication” are major problems of HOA and condo life.

• Some 65.9% are “very dissatisfied” with and 15.1% are “dissatisfied” because of transparency and communication issues.

• A whopping 72.6% of the condo and HOA owners surveyed said they were generally “very dissatisfied” (51.2%) or “dissatisfied (21.4%) with the whole concept of community association living. And, 60.8% of survey respondents urged that community associations should have more government oversight and regulation.

Chicago currently has about 12,235 condo and homeowner associations containing approximately 305,000 residential units, according to a comprehensive directory—the “2016 Association Evaluation Report on Illinois Condominiums and Homeowner Associations.” Association Evaluation, LLC, is a Chicago-based real estate technology firm that rates the livability and stability of condo and homeowner associations. Visit: www.AssociationEvaluation.com.

“Our 2017 CHPPI survey, which rates the level of concern on more than 50 commonly reported topics and issues, found that a broad spectrum—from voting and election procedures to power of the board to fine owners—were viewed as major problems within condo associations and HOAs by respondents,” said Sara E. Benson, a CHPPI advisory member and president of Association Evaluation.

“Regarding transparency, a shocking 67.4% of community association residents say that prior to closing on their home they were not told that an HOA or condo association has a legal right to foreclose on the property if the owner becomes delinquent on assessments, fees, dues and fines,” noted Shu Bartholomew, a CHPPI advisory member and host and producer of “On The Commons,” a weekly radio show broadcast from Fairfax, VA. Visit: www.onthecommons.com.

“I am not aware of any state that requires associations to disclose to a buyer that an HOA or condo association has the power to foreclose on a homeowner to collect alleged money due,” Bartholomew said. “These amounts may be legitimate dues, but also fines, attorney’s fees or other junk fees. Housing consumers should be told before they complete the sale.”  

“Some 59.1% of survey respondents reported that they did not even know prior to closing that their condo or HOA board had the power to issue fines,” Bartholomew said.

The on-line, opt-in survey’s preliminary results were gathered from more than 500 owners residing in condominium and HOA communities in Illinois, Texas, California, Florida, Arizona, Nevada, Missouri and Kansas, and a host of other states coast-to-coast.

The survey will conclude on January 31, 2017. Visit: www.CHPPI.org, the organization’s home page, take the survey and see details of the initial 2015 CHPPI survey report.

According to the Community Associations Institute (CAI) there currently are more than 337,000 homeowners associations where more than 68 million people reside across the United States. CAI is a trade association and special interest group that primarily represents attorneys and property management companies servicing homeowner associations.

In a survey on community association success published by CAI in 2016 it was reported that only 12% of respondents are dissatisfied with their HOA. However, that suspiciously low percentage still translates into 8.2 million very unhappy residents.

One of the biggest attractions of shared-community ownership is the so-called “carefree living” aspect. There are no yards to maintain, grass to cut, snow to shovel, windows to wash, decks to stain or roofs to repair. All an owner has to do is sit back, pay his or her monthly assessment, and enjoy the recreational amenities.

And, condo ownership also can be a good lifestyle choice for singles—especially single women seeking security—retirees and smaller families not in need of larger spaces.

Another attraction of condo and HOA living is the hefty tax breaks—federal and state tax deductions for mortgage interest and property taxes that are handed to owners.

However, critics of community associations say owners really are “subject to double taxation” because they not only pay real estate taxes to local municipalities, but also are required to pay monthly assessments for common areas.

For example, owners in a private community association must pay for snow plowing and upkeep of private roads, maintenance of private streets and lighting, upkeep of storm-water retention basins, and other common-area amenities within the HOA or condo association’s jurisdiction.

A rare chance to rate your condo association or HOA

If you love your condo association or Homeowner Association or hate it, now’s your chance to rate it as part of a new 2017 National HOA Survey conducted by the Coalition for Community Housing Policy in the Public Interest (CHPPI). To take the survey, visit www.CHPPI.org, the organization’s home page. Your input will remain anonymous. Final results will be published in Inside Publications after the January 31, 2017 deadline.

For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.

The post Many Condo & HOA Owners Are ‘Dissatisfied’ With ‘Carefree’ Life appeared first on Association Evaluation LLC..

Home buyers and owners seeking to refinance will find a lump of coal in their Christmas stockings thanks to President-elect Donald Trump.

Economists say mortgage rates in early December skyrocketed to a high for 2016 in anticipation of higher inflation under President-elect Trump’s administration and a long-forecasted Federal Reserve Board (Fed) interest hike this week that are expected to push the cost of borrowing higher.

Eyeing the prospect of a more vibrant economy in 2017 and more rapidly rising prices, lenders are hiking interest rates, experts say. Economists are predicting home-loan rates of 4.5 percent by the end of 2017.

Freddie Mac’s latest mortgage-rate survey posted an average of 4.13 percent for benchmark 30-year fixed rate home loans—the largest interest rate for that loan in 2016.

According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year loan jumped to 4.13 percent on December 8th from an average of 4.08 percent a week earlier. It was the sixth week in a row that rates moved higher. A year ago, 30-year loans averaged 3.95 percent.

The 4.13 percent rate hike boosts the typical the monthly payment on a $200,000 mortgage about $6 a month.

Fifteen-year fixed rate loans averaged 3.36 percent, up 3.34 percent a week earlier. A year ago at this time, the 15-year fixed-rate loans averaged 3.19 percent.

“The 10-year Treasury yield dipped this week following the release of the Job Openings and Labor Turnover Survey,” said Sean Becketti, chief economist, Freddie Mac. The average 30-year mortgage rate started the month 18 basis points higher than this time last year, he said.

Long-term home-loan rates are not set by the Fed. They are tied to the yield on 10-year U.S. Treasury bonds. Ten-year Treasury bond yields have risen sharply to 2.35 percent from 1.6 percent in the third quarter of 2016, pushing loan rates higher.

“As rates continue to climb and the year comes to a close, the December 13th-14th Fed meeting will be the talk of the town with the markets 94-percent certain of a quarter of 1 percent rate hike,” Becketti said.

Higher interest rates have caused refinancing activity to plummet 28 percent in November. However, home loan applications for home buyers are still marching along at a strong pace because many “fence sitters” are purchasing now to avoid higher rates later.

If you are planning to buy a home or condo before higher rates price you out of the market, there are a few facts you should know:

• History is on your side. On the positive side, home-loan rates still are historically low. The annual average rate from 1972 through 2011 was higher than current rates. In 1999, benchmark 30-year mortgage rates were 8.15 percent.

• Lower down payments available. New programs at Freddie Mac and Fannie Mae allow the secondary mortgage market gurus to purchase loans from lenders with lower 3-percent to 5-percent down payments, opening the homeownership door to more young, first-time buyers.

• More lenient credit scores. The average FICO score for home buyers obtaining mortgages backed by Freddie Mac currently is 750, a relatively high score. However, if a borrower is approved for a Federal Housing Administration-insured (FHA) loan, the score averages only 700.

For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.

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This week, we continue down this moldy road into Chicago and New York.

“The Whole Building is Leaking like a Sieve.”

In the leafy Ukrainian Village neighborhood in Chicago, Josh Bizar purchased his breathtaking newly constructed penthouse unit at 849 North Rockwell – a small three-unit condominium building. In 2004, he paid $343,000 for the two-bedroom, two-bath unit.

The original advertising promotion proclaimed: “Only the best in finishes. Custom kitchen with cherry, granite, and stainless-steel appliances, hardwood floors throughout, and contemporary-styled baths with marble and granite accents. Unit boasts 12-foot ceilings and fabulous views from private rooftop deck.”

Four years later one of the units had been abandoned to foreclosure and the other unit was occupied by an non-English speaking couple. Bizar, in his 30’s began having trouble breathing the air in his own home.

“When it rains, I have to take off work to go home and empty the buckets of pots of water. Everything is leaking. The water is coming in through the drywall, the windows, and the ceiling. There’s mold everywhere and I can’t breathe.”

Although Bizar is the president of his small association, it is by default. No one else would – or could – step up. The moisture and leakage problems could not be fixed because the necessary special assessment to cure the leaks could not be levied without all three owners in agreement.

Estimated costs to cure the problem were in the tens of thousands of dollars – or more. Completely alone in his battle with nowhere to turn, Bizar tried to sue the original developer but found he had long since disappeared. urther, the insurance company refused to insure the builder’s defects.

“It’s a nightmare property,” Bizar said softly. He paused, “I’m exhausted. IT’s just too much on my shoulders – for any one person to bear.”

Luxury Living with Resident Alien Mold

Owners at Northside Piers, a 450-unit twin-tower complex on Kent Avenue in New York’s Williamsburg Brooklyn neighborhood, report they were promised “luxury living” only to have their dreams shattered after buying pricey units built with “shoddy” construction.

Owners interviewed by the New York Post said their walls are leaky and poorly insulated; mold is growing in the walls; and there are faulty plumbing, sewerage, heating, and air-conditioning systems – all sources that provide perfect moisture for breeding mold growth.

The sky-high shimmering glass-box building features walls of windows that overlook the waterfront and to-die-for Manhattan skyline views. According to the residents, the views come at a steep price. Many window are tapes around the panes, but rain and air still blow through them.

Despite the claims of unabated growing mold, and an responsive board of managers, a 2,200-square foot penthouse unit is offered for sale by the developer at an affordable $2,477,990. That’s only $1,126 per square foot – a bargain compared with Manhattan prices. There’s no additional charge for the accompanying mold.

“I have lost everything due to black mold. I am slowly losing my fight for life. This has me deathly ill, as my system has no tolerance to fight the toxins that I had been exposed to for some time,” said penthouse owner Lisa McCleskey. “I have developed severe asthma and recurring blood clots that have caused pulmonary embolism several times in these last two years. I constantly suffer from pleurisy around my lungs.”

McClesky lost her home and all of her material possessions. “The most important to me is the childhood pictures of my kids and graduations and accomplishments. It has been more than two years since I have had to leave my home. It has been remediated four times to no avail. I’m still unable to live in it,” she said.

The post HOA Horror: Toxic Stories About Mold Pt. 2 appeared first on Association Evaluation LLC..

The concept of a partnership in an HOA community living is a noble one. Peacefulness, harmony, and tranquility should always be the goal- as well as ensuring the health and safety of the members. However, community associations are not immune to health risks, environmental toxins, and safety concerns. If a problem exists, you are just much closer to it – often with shared walls, heat and air conditioning ducts, plumbing, and sewerage and roofing systems.

Take a deep breath while we examine toxic stories about mold in Illinois, Florida, New York, and California in this 4-part series.

“Help! My Condo is Killing Me!”¹

In 2001, Bradley Wells purchased a stunning one-of-a-kind “heavy timber” penthouse loft condominium in an “award-winning” building at 1000 West Washington in Chicago’s trendy West Loop neighborhood. The irresistibly dramatic two-bedroom unit has soaring ceiling heights of nearly 22 feet and features both a balcony and a private roof deck overlooking the sweeping downtown skyline. Originally built in 1882, the structure was converted from a vacant biscuit factory² to residential condominiums in 1996³. But three years later, the building was already experiencing problems that resulted in special assessments to the owners.

Shortly after Wells moved into the building, he became ill. He broke out in excruciatingly painful rashes and blisters, which turned into multiple systemic-fungal infections. What began with skin lesions, dizziness, puffiness, high fevers, dry mouth, bleeding tongue, burning eyes, indigestion, heartburn, deformed nail growth, loss of taste, thinning skin, vision problems, and scarring.

The cause was extreme mold contamination in both his unit and the surrounding common areas. There was not only mold, but asbestos contamination. Elevated levels of airborne mold spores and the presence of asbestos were confirmed in an independent environmental report.⁴

Because the association did not remedy the situation in a timely fashion, several affected owners simply walked away from their units. Brad wasn’t lucky enough as to stick a bank with his loss. He had paid cash – something he now regrets.⁵

“Oh God, I Can’t Breathe!”

With Florida’s heat and humidity, toxic mold can begin forming in only 72 hours, experts say. Ron McDonald owned a townhome in Tamarac’s Woodglen community for more than 30 years. In 2003, he said a contractor covered a hole in the roof with plastic. When it blew off during a storm, his unit was “inundated” with water.

It took eight inexcusably long months for his association to respond to the water damage, and when McDonald discovered mold, it took another three months to have it checked. By then, he had developed symptoms of asthma.⁶ “I’m unable to breathe,” he said.

After a certified mold specialist inspected the ownhome and concluded that living in the unit was “detrimental to Mr. McDonald’s health, since he is constantly inhaling airborne mold spores.” McDonald filed suit to force his association to fix the problem.

Another Floridian, Steve Serabian, filed suit against his association for mold contamination. He owned a first-floor unit in the four-story Royal Park Condo in Oakland Park for 25 years. But in 2000, water started seeping in through the drywall. He complained to his association leadership and the board began patching the exterior walls.

He never noticed the  mold inside the walls. Three years later, Serabian began having trouble breathing. The situation was so bad that he had to sleep in his car. By 2005, his weight had dropped to 170 pounds from a robust 235. His doctors ordered him to move from his home. Since that time, he not only has had to pay rent on a temporary home, but also has had to pay the assessments, taxes, and a mortgage on the contaminated condo. He, too, filed suit for damages.

^{1. Mark Boyer, “Help! My Condo Is Killing Me!”,” Curbed Chicago (blog), October 26, 2010,}                

^{2. According to the association’s website, the building housed the National Biscuit Company’s (Nabisco’s) biscuit and cracker bakeries.}

^{3. From the Cook County Assessor’s Records.}

^{4. Report by Occupational and Environmental Health Consulting Services Inc., based in Hinsdale, Illinois, September 28, 2006.}

^{5. Gary Lucido, “Condos That Try To Kill You and Take All Your Money,” ChicagoNow.com, Lucid Realty, February 1, 2011.}

^{6. Joe Kollin, “Danger Looms with Mold,” Sun Sentinel, August 22, 2007.}

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Last week we covered: the kickback, overbilling, expense padding, volunteer compensation and underreporting income. In the final installment of this two-part series, we continue highlighting common examples of how HOA’s can unwittingly be stripped of their monies:

• Overreporting expenses. Owners should beware when financial statements show an exaggerated amount for recurring regular monthly expenses. For example, the reported electricity budget is 40 percent higher than the actual electric usage, or the maintenance is reported as double the actual cost. One-time expenses may also be overreported. The goal of overreporting expenses is to create a “slush fund” that can then be siphoned off by whoever is in charge of the bank account.
• False bottoms. This financial chasm is created when income is underreported or expenses have been overreported. False bottoms are created by making false entries in books. By creating a “false bottom,” would-be thieves can extract monies without being easily spotted.
• Photoshopping bank statements. In the age of computers, this illegal act is not at all uncommon. If you go online and Google “How to Photoshop a bank statement,” you’ll get an amazing 508,000 results. The first query: “How do I edit a bank statement after scanning?” Prior to taking off with more than $2 million in assets, one management company sent fake bank statements to more than 40 condo associations it managed.
• Creative accounting. This is any accounting that fails to follow generally accepted accounting principles (GAAP.) For example, GAAP would include preparing a statement of assets and liabilities, a profit and loss statement, and an income and expense report. By failing to follow basic accounting principles and setting arbitrary and misleading matrixes, owners are overwhelmed and often do not admit when they cannot understand the “creative accounting procedures.”
• Insider trading. Invested on Wall Street, this highly illegal act occurs when board members use their power, position, and inside knowledge to acquire property for personal wealth and gain. In associations whose bylaws or covenants, conditions, and restrictions (CC&Rs) contain a right of first refusal, board members have been known to avoid presenting the sale to the board in an open meeting and signing their own waiver in order to purchase a pristine unit at below-market value. High-end cooperative associations are equally vulnerable to this type of abuse, wherein board directors deny purchase applications and subsequently purchase the unit for their own personal pleasure and financial profit. Under the “buddy rule,” fellow board members simply look the other way. Note that association insider trading is not regulated in any way. “Insider trading” is typically the illegal act of trading stocks to one’s own advantage through the use of confidential information. If only Martha Stewart could have been so lucky!
• Debit cards. They simply are an embezzler’s dream come true. Association debit cards have been routinely used for traveling, gambling, medical bills, gas, groceries, cell phone bills and even lingerie purchases at Victoria’s Secret. Some associations are lulled into a false sense of security when two signatures are required on checks. Debit cards require only one signature.
• Forgery. Perhaps one of the oldest scams around, forgery is still running rampant in homeowner associations across the nation. In several cases, signatures of deceased or mentally impaired owners were used to cash checks. Additional means of embezzlement include double billing, false billing, data falsification, inflated management fees, phantom labor, bundling, and unapproved billing.

Best practice would mandate association finances to be transparent to the owners at all times. The monies belong to the owners as a whole – not the board officers or members. Next week, we’ll discuss some clues to help you discover if your HOA is the victim of embezzlement.

The post The Many Names For Theft Inside Your HOA: Part TWO appeared first on Association Evaluation LLC..

In this two-part series, we will highlight common examples of how associations can unwittingly be stripped of their monies:

• The kickback. This widespread act of dishonesty is one of the most prevalent forms of embezzlement because it is extremely difficult to spot. Kickbasks can occur in any association – large or small, self-managed or professionally managed. Kickbacks can range from a few hundred to millions of dollars. Many kickbacks are made in cash, and the agreements are never in writing. All kickbacks have the ultimate effect of raising the unit owner’s costs. One association president directed all cleaning and maintenance contracts to his own company – a clear conflict of interest that owners were too busy to catch despite his fees being three times higher than competing companies.
• Overbilling. This blatant act of theft is the practice of a vendor or contractor billing more for services than was actually rendered. For example, a 20-minute chore is billed as a two-hour job. This can be done in error, but more often, is motivated by fraud. It ca nalso be described as “super-charging” or “gouging.” In the movie The Firm, Tom Cruise wins an impossible case against a dirty law firm by catching an intenional overbilling errors that were sent out via the US Postal Service – making the mail fraud a federal offense.
• Expense padding. This financial sleight of hand includes any type of purchase made allegedly for the benefit of the association owners, but personally benefiting a board member or property manager. It may start off small, such as a tank of gasoline once a month, but escalates to a gas fill-up every week. One association’s president completely furnished his home office on the association’s dollar. He bought an expensive new computer, wireless router, wireless mouse, printer, ink cartridges, paper and $2,000 of “forever” postage stamps and billed it all ot the association – with receipts – and no one even blinked.
• Volunteer compensation. This abuse is a true oxymoron that has been surfacing more and more since the Great Recession. For nonprofit associations whose bylaws clearly stipulate board members may not be compensated, some rogue boards are rewriting the “rules” to allow payment for their services. Other “volunteer” board members are charging associations for services such as conducting “meet and greet” sessions with new owners, supervising workers,” and “watering the grass” – despite having a full-time landscaping service One “volunteer” treasurer- an accountant – has been paying herself $250 an hour from the association’s checkbook for simply writing ordinary checks. These fees can quickly add up to thousands of dollars in unnecessary and frivolous “tasks.” Beware of any board director or member taking or accepting fees from the association. Be especially wary of board directors who have the capacity to issue themselves checks. These situations beg for abuse.

• Underreporting income. This trick is most often seen when financial statements are altered to decrease the actual income received by the association. The difference between the stated amount and the actual amount can then be pocketed by whoever is in charge of the checkbook. Aside from regular assessments, there may be unexpected income from insurance companies, banks, earned interest, fines, penalties, charged interest, and even attorney settlements.

In our next installment, we will cover more ways that your association can be swindled, as well as some clues that your HOA may be the victim of embezzlement.

The post The Many Names For Theft Inside Your HOA: Part ONE appeared first on Association Evaluation LLC..

The HOA, Association of Poinciana Villages (FL), wants to become a city. In fact, a group of residents have been attempting to become a municipal corporation for several years. Poinciana Incorporate Now Citizens Home Organization (PINCHOS) has completed a

It seems as though the large subdivision of Poinciana is tired of being underfunded and getting no services from Osceola and Polk Counties, despite the fact that 47,000 residents pay taxes to both Counties and the state of Florida. Their mature HOA cannot provide the same level of service to its residents that is typical of nearby cities of similar size. Apparently the residents pay assessments, while the developer does not. PINCHOS feasibility study concludes that incorporation would give Poinciana access to millions of dollars in revenues from County, utility, gas, and sales taxes.

PINCHOS residents are tired of Developer Avatar retaining majority control since 1971 and want each resident to have voting rights, instead of a 9 member Board of Directors voting on behalf of each of Poinciana’s Villages.

Why would a large group of HOAs want to become its own municipality?

Compare PUBLIC local government (municipal or county level) to PRIVATE governance in HOAs.

More sources of revenue and financing

• A municipality has access to property and sales tax revenues, low interest loans, issuance of municipal bonds, state and federal grants.
• The HOA is limited to collection of assessments that are not necessarily based on assessed property values. (often the $50K home pays the same assessment as the $500K home and even commercial property owners) The HOA has very limited access to financing through loans.

Ability to collaborate to obtain needed services

• A municipality can take advantage of economies of scale, and can cooperate with nearby towns and cities, or enter into local agreements to provide needed services.
• The HOA has few options to collaborate with neighboring communities or public entities to provide needed services. In fact, its governing documents (the so-called CC&Rs contract) often state that the local governing entity willnot provide such services, because the Developer has given away owner rights to these services as part of the development agreement at the time permits were issued.

More qualified, accountable representation

• Local government elected officials are compensated, are publicly vetted, and they generally possess experience relevant to their respective roles. They often have term limits. Should these officials fail in their work, they are usually voted out of office in the next election. If they engage in unethical or illegal conduct, they will eventually be investigated, and held personally liable, without constituents having to bring legal suit.
• The HOA Board is comprised of volunteers who are practically immune from personal liability and oversight. They and the managers they hire often lack necessary personal and professional skills to do the job. The burden is placed upon owners and residents to investigate wrong-doing or spend personal funds in filing civil suit.

Democratic elections with equitable voting rights

• Voting and elections in a city – one vote per registered adult voter vs. one vote per unit (dwelling) owned. That means tenants vote, and each adult in the household gets to vote. No one in the community gets more than one vote.
• The HOA Developer is granted weighted voting rights and appoints the Board as long as he controls most of the votes. After turnover, Boards are often elected by representative voting members, proxies, and other dubious means. Of course, allocation of voting rights is inequitable: the more property one owns, the more votes one has.

Limitations on legal liability

• The city has sovereign immunity, limiting its legal liability.
• The HOA is a corporation that must insure itself against potentially high legal liability.

This is one evolving story to monitor closely.

***

Reposted with permission

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Once you wade through the alphabet-soup the federal government uses to describe the nation’s newly revised mortgage-application process, understanding what you are signing will be a breeze.

First, some background. The U.S. Congress enacted the Dodd-Frank Wall Street Reform Act to help control the banking industry’s predatory lending practices, which sparked the mortgage foreclosure crisis and the Great Recession of 2008.   

Experts say the nation’s banking crisis happened because there were too many gaps in regulation and no one was looking out for the system as a whole. The Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB) to prevent mortgage abuse in the future.

The CFPB was given the task of revising and simplifying the rules regarding home loan disclosures as they apply to mortgage lending under the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA).

Starting on October 3, 2015, lenders must implement the new integrated disclosure rule—called TRID—on all mortgage applications set forth by the bureau. TRID stands for TILA-RESPA Integrated Disclosure.

While the new TRID rule is designed to simplify the home loan process, it also will take longer—up to 45 days on average—to close a loan. However, under TRID, home-loan borrowers now will receive two key simplified and consolidated mortgage documents, instead of four:

• The Loan Estimate. This new mortgage document, given to a borrower when his or her loan application is approved, replaces the old Good Faith Estimate and initial Truth-in-Lending statement.
• The Closing Disclosure. This new document replaces the old HUD-1 Settlement Statement and the final Truth-in-Lending statement.

Borrowers must receive the Closing Disclosure document in writing three days prior to the closing. Any last minute changes in rates or terms trigger another three-day delay. So the borrower has time to read and understand all the terms and costs.

Now, you won’t have to be a math major to clearly see and understand exactly what you’ll be paying. The Loan Estimate will show the total loan amount, interest rate and charge, monthly loan payment, and other loan closing costs—all individually broken out.

A glance at the Closing Disclosure will tell borrowers exactly how much money they’ll be paying at the closing table, including costs for the appraisal and title search. The form also clearly shows the amount of the monthly loan payment, money escrowed each month for property taxes, homeowner’s insurance, and mortgage insurance.

So, theoretically, under TRID there should be no last minute surprises. The numbers should match the costs the borrower was originally quoted, and lenders will not be tempted to add on any hidden extra fees during the closing.  

“TRID is about full disclosure to the consumer—and it’s long overdue in association-governed communities where excessive transaction fees, document charges, and upcoming special assessments are often hidden from buyers,” said Sara Benson, president of Association Evaluation, a Chicago-based condominium-rating service agency.

“If you are purchasing a condominium, your lender will need a lot of additional information about the association in order to assess your financial ability to repay the loan,” Benson warned.

“Know Before You Owe,” the government’s new TRID website explains the new disclosure forms to real estate professionals—Realtors and lenders. It also includes “Your Home Loan Tool Kit,” a 26-page, step-by-step, home-loan application guide for consumers.

For more information, visit: http://www.consumerfinance.gov/know-before-you-owe/real-estate-professionals/.

***

For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.

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Article reposted with permission from Don DeBat

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By Deborah Goonan, Independent American Communities blog http://independentamericancommunities.com/

In a recent discussion forum on rules regarding display of flags in Common Interest Communities (aka Homeowners Associations), there was some vigorous back and forth about the fact that Association-controlled communities are controlled primarily by the CC&Rs (or Declaration of Condominium) contract, rather than Constitutional law.

The classic Association Governance industry argument is that the governing documents are contractual agreements to which property owners “agree,” and that the Constitution forbids interference with, or “impairment,” of HOA contracts.

One Community Association Manager’s comment on the thread reads as follows:

“To call this a patriotic issue is fatuous at best. The number of ‘patriotic’ issues can bury an HOA or Condo with beliefs of how to showcase them. The ‘freedom’ is to make the changes in an organized fashion. If your neighbors agree, then change the docs. If not, agree to conform or sell and move on. No one is forcing you to live where you, and only you chose to live…”

Let’s unravel several untrue premises and faulty assumptions.

First of all, a buyer, or someone otherwise acquiring title to an Association-controlled property, has absolutely no control over the contents of this “contract” to which one supposedly agrees without full disclosure. It’s not as though a home buyer is instructed to sit down with an attorney prior to closing, reading and initialing each cumbersome page of Declarations of  Covenants, Conditions, and Restrictions or Declaration of Condominium, with an opportunity to ask for clarification and to negotiate the terms of the agreement with the Developer or Owner-Controlled Association.

Even if full disclosure were provided in plain language, those Declarations are subject to change significantly after purchase or transfer of title. On the day you move in, the pool is open all weekend, you can park your Ford F-150 in the driveway, and your 55 pound dog is acceptable. Next month or next year, the Board could change the rules, sometimes without a direct vote of members, depending upon the latitude spelled out in the governing documents. Or there might be a membership vote at the next annual meeting. All of a sudden, the pool is closed on Sundays, you are expected to park your truck in the cramped garage, and you must get rid of your pet unless he loses 15 pounds.

…a buyer, or someone otherwise acquiring title to an Association-controlled property, has absolutely no control over the contents of this “contract” to which one supposedly agrees without full disclosure.

Furthermore, the entire process of amending the governing documents “contract” is most often undemocratic.

The only title holders that have meaningful power to amend its terms are the majority shareholders, usually represented by the Developer, affiliated investors, or perhaps a voting bloc represented by a handful of persons who either own multiple units or hold most of the proxies. These same individuals often have the power to unilaterally amend By-Laws without a vote of membership. The truth is, a physical majority of people (homeowners) might not hold a majority of corporate voting interests, resulting in Minority Rule.

Even if that’s not the case – in the rare instance that each member owns an equal proportion of property – the homeowner must be prepared to conform to Majority Rule, subject to change at any time in the future, regardless of the resulting inconvenience or hardship.

Who, in their right mind, would agree to these terms, if given the choice?

If a buyer were writing a contract to purchase a home in a homeowners or condominium association, what would it look like?

• If HOA governing documents were valid, consumer-friendly contractual agreements, then title holders would be required to agree to any change in the terms of the agreement.
• Likewise, property owners would demand the right to withhold payment of assessments for non-delivery of services or non-performance of HOA duties.
• The HOA would not be permitted to use title holder funds to settle disputes with unit-owners in court.
• The HOA would not have the unilateral power to fine, where the homeowner is presumed guilty with the burden of proving innocence.
• Nor would title holders agree to the HOA’s right to foreclose upon private property to collect its lien on relatively small debts – often inflated by hefty legal and collection costs.

On the issue of “choice:” If one wants to own a home in many US housing markets, one is forced to hold one’s nose and take the bitter HOA pill.

In reality, the only “choice” is to simply walk away from the closing table or refuse to buy into an association governance. But when 80% of new construction is burdened by Association control, then for millions of buyers in the fastest-growing real estate markets, choice is merely an illusion.

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