Re: Petition for FHA & Other FHA refusals
From: Raines Cohen (rc3-coho-Lraines.com)
Date: Sat, 29 Mar 2014 11:28:08 -0700 (PDT)
On Thu, Mar 27, 2014 at 8:36 PM, Sharon Villines <sharon [at] 
sharonvillines.com>
wrote:

> I signed the petition for the woman who can't get a reverse mortgage
because FHA considers cohousing not to be a real condo.
>
> We have a member who works with a non-profit that tries to influence FHA
policies, but questions this report because it alleges something but offers
no proof.  Other people have mentioned similar refusals but have nothing in
writing.
>
> I'm not doubting that this has happened, just asking for some independent
verification.

Sharon -

Thanks for signing the petition (you were one of the first!), and for your
attention to the issue, and your work on dynamic governance and helping
cohousing communities work well with the system by functioning well as
condominiums through your education and community-building around Reserve
Studies best practices. You have documented how community approaches with
collective full-group shared leadership and vision leads to greener,
healthier, longer-lasting physical and social structures.

I'm the organizer of the petition, so I can verify, on behalf of my
72-year-old neighbor Alice Green, after over two years working together on
this, that the key issue preventing her from getting a reverse mortgage is
that our condominium community is a cohousing neighborhood.

You'll find the "smoking gun" in our entry in the HUD condo approval
database - our legal name is Strawberry Commons HOA and we're in
California, so you can look us up yourself. Our listing reads, "THIS IS A
CO-HOUSING CONDOMINIUM PROJECT WHICH IS NOT ELIGIBILE FOR FHA PROJECT
APPROVAL." Yes, "not eligibile," typos and all. This despite our 1997 award
from HUD for "Innovations in Homeownership," and our documents being
constructed in all respects to be an FHA-approved condominium project.

Yes, we know a few cohousing neighborhoods have gotten prior FHA approvals,
but in the years since the 2008 housing crunch, HUD has gone from a "lender
of last resort" for people not served by the overall mortgage market to the
"last man standing" universal lender backing most home loans, and it is
applying new standards and interpretations; cohousing appears to be in the
pile of things HUD might call "stuff we don't understand so let's say no
for now." We have been hesitant to point our fingers at condo projects that
got past approvals that haven't expired yet, for fear that our attention
would lead to loss/revokal of approval, but now is the time to rigorously
go through and document cohousing's exemplary record of maintenance and
foreclosure prevention, so the value can become clearer to regulators and
our community relationships and meals together can be seen as a benefit,
not a liability.

After three failed resubmittals for our project with minimal feedback, we
finally asked for direct guidance and got to speak with our HUD regional
condo-approval coordinator who helped us understand that this is coming
from HUD national, in ways that many individual borrowers who relied on
lenders or brokers to seek approvals through an independent service
business do not get to the point of understanding because the details get
lost in the game of telephone -- they just want to close the loan, not fix
the underlying problem, and as soon as they find the answer is "no," they
move on or drop it.

Yes, there's also the additional challenge that all units in our project
are permanently affordable, with prices capped for 30 years, going up
slowly with capital improvements plus area incomes to match inflation, as a
trade-off for our taking rent-controlled apartments off the market when we
converted to condos in 1997. However, our development agreement with the
city was designed (with obscure language that I've only recently come to
understand) to meet a particular loophole in the HUD/FHA guidelines (see
Code of Federal Regulations, section 203.41 parts C and D), by being set up
to serve people below a certain percentage of median income and by being
structured so that if HUD or any bank forecloses, they can sell at market
rate, kind of a "get out of jail free" card that lets them ignore the
affordability price restrictions for purposes of underwriting/calculating
property value. HUD has a process to review and approve these agreements
through its legal department, but it won't even start that until our core
project application is approved. We do have to get our city attorneys to
fix a technical error they made along the way (amending a document that had
been superceded by our individual per-unit documents, which prevents it
from being formally released), but we expect that to be simple once they
have clear guidance from HUD, based on our conversations with the city's
housing department.

I briefly met Housing Commisioner Carol Galante last year and learned that
she knows people living in cohousing (she comes from a Bay Area nonprofit
housing background and studied at UC Berkeley's Department of City and
Regional Planning - Go Bears!) and we are working with a HUD staffer to
find solutions, but it could be years until the issues of interpretation
are fixed through a formal rulemaking process. We believe that with the
community connections and power of the cohousing movement, we can find a
faster fix in time to help Alice and others like her in cohousing
neighborhoods across the country.

Yes, reverse mortgages are not the ideal choice for everyone, but in this
particular case, we believe it to be the best available tool to help Alice
stay in the community by providing her with an ongoing income so she can
pay for condo dues (covering fully-funded reserves and extensive
maintenance and insurance), property taxes, and food, an amount that
exceeds her current income. She has no kids or car and lives an incredibly
rich, thrifty and efficient life, biking everywhere. She's living in the
inner San Francisco Bay Area on under $12,000 a year fixed income, in a
place that can be challenging for people making even ten times that. If she
were to move out, she would be spending far more, have less of a grassroots
support network, and would qualify for subsidized publicly-assisted
housing. Even fiscal conservatives should agree it is in the public
interest to help her tap her own hard-earned home equity to stay in a
supportive community.

For those of you, like Patti from JP coho, concerned about what happens to
a cohousing home when the owner dies or has to move out and sell: It's the
same as for any cohouser at any age chooses to leave: ideally the community
helps market it to find a great new neighbor to buy it, and the mortgage
balance is paid off by the proceeds of the sale, just like any other
turnover, with the former owner or estate getting the remainder. The secret
sauce that makes an FHA-approved "HECM" Reverse Mortgage loan especially
relevant for Alice and others in her shoes is this: if she outlives her
projected life expectancy and then she continues to live in her home after
its value is exceeded by what she's received in reverse-mortgage payouts
and interest, the HUD mortgage insurance will continue payments, at no risk
to the lender or her heirs, thanks to the federally-backed mortgage
insurance she pays for as part of the loan.

Thanks to all of you and many more, Alice's petition got over 10,000
signatures in just the first weekend, with 100 pages of moving comments
about cohousing, your own situations, and the fundamental societal dignity
involved in helping prevent our elders from being forced from their homes.
We weren't prepared for such a groundswell of support emerging so quickly,
so we didn't have the website ready to support the education and advocacy
we'll need, but we are developing this now at my Aging in Community website:

http://www.AgingInCommunity.com/

We'll be adding videos and pages with much more depth explaining cohousing,
reverse mortgages, and the particular challenges we're facing. We'll be
naming partners (national and regional communities-movement organizations
are likely candidates, along with Partners for Affordable Cohousing and
sharing-movement advocacy groups) and supporters (some of your very-moving
comments are worthy of their own campaigns and stories), as well as calling
out institutions and people who are standing in the way. So far we've
clocked hundreds of hours of volunteer time on this project, and would love
to get help from people all over. We'll be naming actions you can take,
including financial support and direct lobbying -- wouldn't it bring great
attention to the issue to send Alice to hand-deliver the petition to the
Housing Commissioner in DC as part of Mid-Atlantic Cohousing's upcoming
month of community events in May?

I just this month brought up this issue at the first Global Ecovillage
Network elders' gathering at Findhorn in Scotland, and presented about
cohousing at the Aging in America national conference in San Diego, where I
took every opportunity to bring the issue to the attention of key
aging-movement influencers and connectors, who are especially looking for
opportunities to remove obstacles that prevent Aging in Community. Sharon,
I look forward to getting connected to your neighbor who has experience
lobbying HUD -- we're going to need all the help and advice and connections
we can get.

Raines Cohen, Cohousing Coach and Community Organizer
Certified Senior Advisor and Audacious Aging "Aging-in-Community" chapter
author
Cohousing California/East Bay Cohousing

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