About HOA Loans and Condo Association Loans

Loan officers who concentrate on loans to individuals are very familiar with the variety of situations in which a homeowner seeks a home improvement loan. Typically, the amount of the loan is based on the equity that the owner has in the home, and the lender secures the loan by taking a second mortgage on the residence.

Loans to community associations (known as HOA Loans or Condo Association Loans) can be viewed as collective home improvement loans. However, the legal and financial structures of HOAs and Condo Associations dictate that loans to such entities have more characteristics of commercial loans than residential loans.

HOA Lenders should be aware that the borrowing demands for community associations around the country are growing. And those demands will continue to grow as more and more American home buyers choose a home that includes some form of common interest as an integral part of home ownership.

According to estimates of the Community Association Institute, there are more than 85,000 community associations in the U.S. today, a majority of which are condominium associations. Moreover, the same source estimates that more than 50% of new housing in the 50 largest metropolitan areas in the U.S. is now being built within a community association structure.

Already 15% of the U.S. population belongs to a community association of some type. The Department of Housing and Urban Development has estimated an even greater housing trend toward the community association form of ownership and has predicted that close to half the U.S. population will be living in condominiums by 1995. Particularly with regard to the condominium form of ownership, lenders should also be aware of the growing number of commercial buildings that are coming under this form of ownership-including condominium hotels, office buildings, warehouses, medical office buildings, and condominium parking garages.