Federal Legislation for Condo Safety Brought to Capitol Hill
by rcpmanagemedev, June, 15 2022
The Community Associations Institute supports Representatives Charlie Crist (D-Fla.) and Debbie Wasserman Schultz for introducing the Rapid Financing for Critical Condo Repairs Act of 2022, H.R.8304. This legislation would allow the U.S. Department of Housing and Urban Development’s Federal Housing Administration to insure condominium association building rehabilitation loans made by private lenders—a move that would provide significant benefits to condominium associations, according to lenders specializing in these types of loans.
Aging Condos and Infrastructure
Following the partial building collapse at Champlain Towers South Condominium Association in Surfside, Fla., the Community Associations Institute and Foundation for Community Association Research have published new Condo Safety Resources calling for community association board members and managers to take reasonable steps to repair preserving aging infrastructure.
Based on the CAI’s survey, there are about 7.4 million condo units in the U.S., and as more states require building inspections and safety reform, demand for financial resources to make repairs will increase. Because a building inspection is different than a reserve study—it requires an actual visit to the site—association boards will have to decide how best to proceed with necessary but unanticipated repairs.
Condo Associations and Repair Financing
Most loans from private lenders have shorter payment terms, approximately 10 to 15 years. Some of these loans also come with prepayment penalties. On the other hand, some association loans are designed so that payments are spread out as if the loan has a longer term; however, there is a balloon payment due by year 10 which then requires the association to refinance.
The Rapid Financing for Critical Condo Repairs Act modifies Section 234 of the National Housing Act to allow FHA insurance to be used for condominium association loans earmarked for building rehabilitation.
Collateral for Condo Association Loans
Collateral for condominium association loans comes from either future pledges of assessment income or the real property itself, and sometimes a combination of both. Because FHA’s mortgage insurance programs are backed by real estate, the agency is allowed to insure these kinds of loans.
The legislation allows for FHA-insured condominium association loans to be used for the rehabilitation, alteration, repair, improvement or replacement of a condominium project’s common systems and infrastructure. In order to protect against financial loss, this restricted insurance program only insures 90% of building rehabilitation costs.
RCP’s team of management professionals have extensive experience and industry knowledge when it comes to managing everything from high-rise condominium communities to HOA’s and beyond. Contact us today and learn how we can help.