Obtain Urgent Financing for HOA Infrastructure

Obtain Urgent Financing for HOA Infrastructure: The Problem

HOAs can borrow to fund assessments for major infrastructure improvements. The problem is that the loan terms are not favorable. HOAs with low and moderate incomes should be able to secure government insured loans on favorable terms and should be eligible to apply for grants in cases where the problems were passed off to them from a developer.

Background

High monthly fees and special assessments cause various problems for owners. They can cause financial strain (especially for retired and lower-income owners) and account delinquency, including interest and late fees on unpaid assessments. These can lead to foreclosure, loss of home, and homelessness. In Florida, where high-rises were built in the 1950s and 1960s, they have had special assessments of $100,000 each! In California, an association failed to maintain/repair piping on schedule which led to slab leaks in the foundations of buildings. Their HOA reserves were nearly depleted at about $90,000 per repair. Repairs were made unit by unit instead of proactively addressing the entire plumbing system for the foundation of the four-plex. Dues rose $150/month (or 33%) in three years, and the slab leaks continue.

How do HOAs find themselves in this predicament? Often, no portion of earlier owners’ assessments were set aside for infrastructure that would need replacement in 30-50 years; their dues were kept low. Current owners get saddled with paying for prior and future owners’ share of infrastructure costs. If HOAs can obtain 30-year loans with favorable terms, the cost of infrastructure replacement could be spread across current and future owners. Furthermore, the monthly dues increase would be smaller than if the total cost were imposed on just the current owners.

However, there are barriers to obtaining loans. HOA board members may need to be made aware that borrowing is possible or may have an unrealistic bias against borrowing. Currently, loan terms are generally unfavorable, and boards often need more expertise to find and negotiate good loan terms. However, if these infrastructure loans made to homeowner associations were backed by the Fannie Mae and Freddie Mac government agencies, HOAs could obtain favorable financing that individual Americans have enjoyed. In some cases, grants could also be made available where gross financial malfeasance has occurred.

Objective

The objective of the Funding Initiative is to obtain funding through grants and government insured loans for infrastructure improvements in HOAs.

Five Key Steps for this Initiative

Research the issue. We are currently in the research stage. Solutions will only be proposed after all of the components of the problem are understood.
Propose a solution.
Engage stakeholders.
Implement the solution.
Verify the solution.

Owners Are Asking: How can I help?

If you have some time we need a lot of help with the Initiatives. Please consider volunteering.
At the very least all owners should complete these anonymous questionnaires. (When you complete the forms we will use that data to show legislators what the problems are).

Do you live in Pennsylvania? We need your stories!

We are currently preparing to meet with legislators. Please send us your experiences that have had a negative impact. Especially those impacting your whole community with serious financial consequences. Please contact us at [email protected].