Just Approved: Enabling A Dream Condo Purchase With HOA in Litigation
San Francisco Chronicle on September 12th, 2021:
Loan Officer: Alex Greer, The Mortgage Outlet.
Property Type: Condo in San Francisco’s Mission Bay neighborhood.
Appraisal Value: $999,000 (appraisal waiver).
Loan Type: Conventional 30-year fixed.
Loan Size: $749,250.
Rate: 2.824 percent.
APR: 2.855 percent.
Backstory: Homeowner’s association litigation in California is extremely common, whether it is construction defects, personal injuries, contract disputes or a laundry list of other types.
However, finding a conventional lender that works with HOA litigation is not as common. Most big banks simply deny any condo mortgage loans with any type of HOA litigation.
This has created the huge misconception that conventional loans are not eligible on condos with HOA litigation. And is probably the reason properties see 10 to 20% value declines after their HOAs enter litigation, and can sit on the market for months — when, in fact, conventional guidelines provide a number of different scenarios in which condos with HOAs in litigation are eligible for conventional financing.
In this particular scenario, the property’s HOA had been locked in litigation since 2018 with no end in sight, leaving the potential new owner thinking they would not be able to close on their dream home.
A deeper dive into the litigation revealed that it had a claim amount that was known, the claim amount was covered by the HOA’s insurance and the insurance carrier was providing the defense. Per conventional guidelines, all three of these litigation characteristics are acceptable scenarios for conventional financing.
In close collaboration with the HOA’s attorneys, we were able to provide underwriting with all of the documentation they needed in regards to the litigation, and closed in 10 days from start to finish.
Alex Greer
Direct #408-352-5147
NMLS #1056079