Cohousing-L Mailing List: Re: co-housing unacceptable to Fannie Mae?!?

[Don Benson (benson6451]

In 2010 we engaged about this subject with a mortgage broker that was 
interested in doing the work making a loan (different from some banks?) and 
including a member of the HOA BOD ( a structure that we have moved away from 
since then) in the process, and discovered the following which may be useful.  

1.  No one that referenced co-housing was able to provide any documentation 
from any government agency regarding co-housing.   We also found that 
"co-housing" is not a recognized term in the real estate legal language of the 
Oregon Real Estate Commission, and concluded from our collective experience 
that the term is also not uniformly defined and practiced anywhere, so when 
dealing with the formal real estate transactions, we avoid using it.  

We also found in checking the listings of Fannie and Freddie that they do own 
the loans for some of our owners, including ours with Freddie Mac.

2.  The point about "right of first refusal" was directly linked to legality of 
any language or action that might or could be considered discriminatory.  
Consequently our HOA agreed to remove the paragraph from our CC&R's and engaged 
an attorney to assist us with this change.  To address the underlying concern 
of the HOA that allowed us to insert the clause in the CC&R's in 1998, we are 
increasing our level of engagement with potential buyers to increase their 
awareness of our processes and expectations of owners, and their readiness to 
to deal with the challenge between aspiration and behavior after purchase.

3.  Lenders and government agencies seem to becoming more interested in the 
percentage of non-resident owners (reference time-share ownership) and the size 
of the Reserve Fund in their decision process.

4.  The issue was clarified when we discovered the HUD - FHA Mortgagee Letters 
2009-46 A and B dated Nov. 6,2009 regarding Condominium Approval Process.

In the process with the Broker, we obtained a copy of a FHA Connection Approval 
Document showing acceptance and expiration date (term is 2 years) for our condo 
association.  The term runs through the fall of this year, so we have not begun 
the process for renewing the approval.

Don Benson
Trillium Hollow
503.296.7249

On Apr 24, 2012, at 11:14 AM, Diana Carroll wrote:

> 
> Ug!  yes, we ran into this.  We were never able to get a straight answer to
> your question.
> 
> For a long time, we weren't approved for Fannie Mae mortgages because we
> didn't have the right % of units sold.  Then, once we did, we ran into a
> couple lenders who told us that Fannie Mae had recently issued a statement
> *specifically against cohousing*, by name -- that being a cohousing
> community meant you didn't meet Fannie Mae guidelines.
> 
> This was of great concern so we tried to contact fannie Mae directly to ask
> what was what, but we weren't able to get to talk to anyone official...they
> only want to interact with banks, and they are really closed-lipped in
> public about what does and doesn't qualify for their guidelines.
> 
> We eventually found a lender who said, no, Fannie Mae was fine with
> cohousing (or, rather, didn't care about cohousing), and that the other
> banks were just saying that.
> 
> So...what?!?
> 
> We never got to the bottom of that, but did learn that banks often
> misrepresent or perhaps even misunderstand fannie mae guidelines.
> 
> If you ever get to the bottom of this mystery I'd love to hear about it.
> 
> - Diana, Mosaic Commons in Berlin, MA
> 
> PS: One of the reasons we don't have a "right of first refusal" clause in
> our CCRs is specifically because we were forewarned that it made mortgages
> hard to get.
> 
> 
> On Tue, Apr 24, 2012 at 1:56 PM, Lyle Scheer <wonko [at] monkeyhouse.org> 
> wrote:
> 
>> 
>> Hi all,
>> 
>>   I'm going through a mortgage process, and hit an underwriter who is
>> telling me, "the project is unacceptable to Fannie for two reasons right
>> off the bat.  One, the project is a Co-Housing Community and second [has
>> a right of first refusal clause]"
>> 
>>   The second one I've heard others on this list have trouble with, and
>> I'm working to clarify that it's only a 30 day right of first refusal
>> and then reverts to sale to any 3rd party... see if that flies.... work
>> with my community to amend our CC&Rs quickly if not.... I also thought
>> we had language that let banks off that particular hook, but can't find
>> it at the moment.
>> 
>>   However, it's the first bit that truly startles me.  Does Fannie Mae
>> really find co-housing in general unacceptable?  Has anyone ever gotten
>> that back from an underwriter?  Really?
>> 
>>   I'm fighting back on that one by trying to state very clearly that
>> we're incorporated as an HOA, and that we follow HOA rules... all our
>> legal documents talk about a board of directors and votes for exactly
>> this reason.  (NO... we're not co-housing, we're an HOA)
>> 
>>   However, I'm curious to anyone within the past couple of years where
>> the underwriters are getting very picky because of the financial state
>> of loans, has anyone run into the "can't Fannie Mae because you're
>> co-housing" and successfully argued back and how you did it.  Just
>> looking for more ammo in my particular somewhat urgent situation.  I
>> just find it hard to believe Fannie Mae universally is blocking
>> co-housing... if that were truly the case this would then be a call to
>> arms email of what we can do nationally to fix co-housing's general
>> image with Fannie mae.  Personally I just think it's a worried
>> underwriter, but that's also an issue.
>> 
>> - Lyle
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>> 
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