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Recently my 26-year-old, 32-unit condo association applied to HUD for loan approval for FHA and VA loans. We were rejected based on the following: "In order to be eligible .. a property cannot be subject to any legal restrictions on conveyance as required by 24 CFR 203.41, 203.512 or 234.66 except for restrictions specifically permitted by those regulations." I googled, but I cannot understand what this means. Anyone?
In our condo board meeting minutes about the rejection was added that in our ... "Ownership Declaration it says 'There shall be no more than four (4) persons occupying any one unit'. HUD will not grant FHA approval until bylaws are changed and recorded with the county." Does this mean this is the only reason our application was rejected? If so, have other associations reworded the number of people who can occupy any one unit to meet HUD's approval? Our units are all two bedrooms with maximum 1,020 sq.ft. It is my understanding that an association would want HUD approval because 1/4 - 1/3 of all home buyers get FHA or VA loans, and without that approval, you are limiting the number of people who even look at your for-sale unit. There are many financial benefits of getting a FHA or VA loan - lower down-payment rates, lower borrower insurance rates, first-time buyer eligibility, etc. Realtors and anyone else can easily look online to see what condos have been approved or not approved or rejected by HUD. See: https://entp.hud.gov/idapp/html/condlook.cfm When you fill in the blanks, you don't need all of the information. For instance, under name of Condo mine is officially Cedarwoods Condominiums, but that did not bring anything up. The HUD response said to just put the first three or four letters in, such as Ceda, and that worked being that I already had the state and the zip code in there. We currently have one unit in foreclosure and six units that are rented out. Many of these had for-sale signs up a long time and did not sell. Had the association had HUD approval, there may have been more potential buyers looking at the properties. By not managing the HUD approval process, my board of directors is limiting financial options for us owner sellers. That's not right. Also, my board is very threatened about changing any of the bylaws because they think it is such a complicated process. Is it? I would assume our association attorney could tell them exactly what they needed to do.
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Our Minnesota developer went bankrupt and the bank now owns 51% of the units. They have some but not all declarant rights so they can pass them on to a bulk sale buyer. We have sued the developer for failing to fund the reserves for 2 years and for not completing and fixing the building. Will the bulk sale buyer become the declarant after purchasing the bank's units? Will he have all the special declarant rights? Will he be responsible for fixing the building and funding the reserves?
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