Cohousing-L Mailing List: Re: FHA Approval

[Diana Carroll (dianaecarroll]

I think the construction loan issue is worlds different than home owner
mortgages.   We had already secured our construction loan before we even
had a legal name for our condominium associations.  (We are three: Sawyer
Hill EcoVillage, which contains two sub associations: Camelot Cohousing and
Mosaic Commons).  (Obviously we already had names for our *groups*...but
the HOAs weren't legal entities.)

I don't think the presence or absence of the word cohousing affects the
*construction* loan process.  Unlike mortgages, you don't walk into a bank,
apply, and walk out with an answer.  Getting the construction loan involved
*months* of negotiations with multiple lenders, who did quite deep due
diligence.  They were totally aware of our not-quite-standard structure
from day 1.  In fact, in the end, our construction loan was offered by a
consortium of four lenders: one was a plain old bank (Boston Private Bank);
one was a regular bank that had a strong reputation for social
progressiveness (Wainwright Bank); and two were not banks but lenders that
specifically lent to us *BECAUSE* we were cohousing.  (Community Fund of
New England, and Life Initiative Fund).

I think trying to hide (or do the don't ask/don't tell thing) regarding
cohousing for a *construction* loan is a non-starter.

Mortgages are a whole different story.  There are a dozen different flavors
of mortgages (mortgages from mortgage "factories", mortgages from
traditional banks, which may be resold to Fannie Mae, Freddie Mac and other
secondary market buyers, or may be held in the bank's portfolio, mortgages
that are guarantied by federal agencies like FHA or USDA (yes, we have one
USDA mortgage, who knew!), mortgages guaranteed by state agencies or NGOs,
"soft second" mortgages subsidized by tax payers or non-profit groups, etc.
etc.)

There are so many entities involves in the home mortgage transaction that I
don't think it makes sense to say "stand up for your rights, they can't
discriminate".  Mortgage lenders and guarantors vary hugely in the amount
of due diligence they do, how risk averse they are, and even what their
actual goals are. The buyers are our members, and they benefit by having as
many options available as possible...which means making our homes appear as
attractive (read: low risk) as possible to as many lending sources as
possible.  With the help of our lawyers and construction lenders, we
specifically designed our condo docs to be as "lender friendly" as we could
without negatively affecting our community.

In that context, I think it makes total sense to have your legal face
(including your name and your docs) minimize the word "cohousing", and
emphasize the parts the lenders *should* care about, like reserves,
liability, etc.

Cohousing is not a protected class.  Banks discriminated for years against
people of color (and probably still do) but doing so is illegal, because
race is a protected class.  We aren't, and it is totally legal for banks
*AND GOVERNMENT AGENCIES* to discriminate against us all they want.

Diana


On Mon, Mar 31, 2014 at 3:03 PM, Ann Zabaldo <zabaldo [at] earthlink.net> wrote:

>
> Hi all --
>
> Following this thread is certainly interesting!  Like working my way
> through a maze ...
>
> Now I hear we're talking about three different things:
>
> 1.  FHA loans
> 2.  Conventional mortgages
> 3.  Construction loans
>
> Oh yes ... and if we go back to a connecting thread ... denial of a reverse
> mortgage ...
>
> As I understand it, FHA loans are federally insured mortgages given
> through conventional lenders.  FHA simply guarantees the loan.  Someone w/
> more experience can clarify this for this list.
>
> Conventional mortgages such as the "take out" mortgages for condo or coop
> sales or a resale of a detached home is the mortgage  you could get walking
> into 1st Acme Bank.
>
> Construction loan is part of the development package put together by your
> developer (which may be YOU.)  A professional developer brings money,
> experience and expertise to the table.  If she or he is not bringing these
> three things to the table then you need to think carefully about who IS
> bringing them to the table.  An experienced developer will come w/ a budget
> plan not only for pre-development and construction but also the mortgages
> for the buyers of the units.  Otherwise, he/she could end up w/ a beautiful
> project and no ability to sell it.  If people can't get mortgages they
> can't buy.
>
> Both Takoma Village Cohousing and Eastern Village Cohousing in DC and MD
> respectively were built w/ "cohousing" in the name.   The developer made
> sure he had the "take out" mortgage financing at the same time he had the
> construction loans.
>
> There has been at least one case at Eastern Village where a resident
> trying to refinance w/ the same bank that held his mortgage was denied
> refinancing because "cohousing" was present somewhere in the documentation.
>    The bank demanded proof that the project was a condo overlooking the
> fact that the condo docs given to the bank CLEARLY state Eastern Village
> Cohousing Condominium.  And then had all the verbiage about EVC being a
> condo under Maryland law, etc. etc. etc.
>
> I think this kind of thing is due to:
>
> 1. Ignorance -- that's why I appreciate Sharon's position on facing the
> issue head on
> 2. Inability to read or fear of making a deduction based on reading:  it
> says "condo." Maybe it's a condo ...
> 3. Fear -- real estate is very conservative.  Don't do anything out of the
> ordinary ...
> 4. Overwork
> 5. An immediate excuse not to make a loan
> 6. Regional "norms"
>
> Takoma Village Cohousing has had four resales since that issue w/ Eastern
> Village noted above.  Two were for all cash but two were not.  Both sailed
> through no problems.
>
> I understand things in other parts of the country are very different than
> here in DC.  It's unfair to compare DC w/ Nebraska, Alabama, Nevada or
> California. We're our own little bubble unto ourselves.  Sometimes I think
> I live in a wholly different solar system.
>
> But ... just for what it's worth ... sharing my experience in this market.
>
> Best --
>
> Ann Zabaldo
> Takoma Village Cohousing
> Washington, DC
> Principal, Cohousing Collaborative, LLC
> Falls Church VA
> 703-688-2646
>
> On Mar 31, 2014, at 2:23 PM, Kay Wilson Fisk <kwilsonfisk [at] comcast.net>
> wrote:
>
> >
> >>>> In the meantime, I would still recommend keeping "cohousing"
> > out of your formal legal name it you want access the competitive
> > mortgage rates.
> >
> > Agreed. In our case, we were only able to find one bank in our
> > county willing to give us a construction loan, and that was only
> > because, while they were very nervous about the "cohousing"
> > label, they "worshipped" our construction contractor, who had
> > developed the highly successful Poulsbo Place.
> >
> > Unless you have truckloads of cash, FHA loans won't do you any
> > good without a construction loan!
> >
> >
> > Kay Wilson
> > Meadow Wood Condominium
> > AKA Meadow Wood Cohousing
> >
> > _________________________________________________________________
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> >
> >
>
>
>
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