29-Apr-16 – The new federal financial disclosure questionnaires targeting borrowers who reside in condominium and homeowner associations are a good start towards standardization, but they are incomplete in many ways, real estate experts say.

The Uniform Mortgage Data Program, an initiative of the Federal Housing Finance Agency, Freddie Mac, and Fannie Mae, are designed to provide greater consistency and financial clarity for lenders as they work to collect information to determine eligibility for mortgages secured by units in more than 350,000 condo and HOA projects where 70 million Americans live.

“One major omission in the Uniform Mortgage Data Program questionnaires is there is no disclosure of who pays the document fees necessary to gather the information in the forms,” noted Sara Benson (left), president of Association Evaluation, LLC, a Chicago-based real estate data analytics firm that has more than 50,000 Illinois condo associations and HOAs in its database.

Document fees include, but are not limited to…

Private “transfer or resale fees.” These frequently include master-association and sub-association transfer fees typically charged by management companies that can cost hundreds or thousands of dollars. Fees can involve a simple name change on a roster and/or a mailbox when a condo is sold.

Document delivery fees. These often are electronic – not paper – copies of numerous documents that a new owner should receive before committing to a home purchase. Documents include budgets, board minutes, bylaws, declaration of covenants, conditions and restrictions (CC&Rs), disclosures (including filling out the questionnaires), reserve studies, audits, financial statements, and corporate certificate of good standing.

“Who pays these fees? And, how much is paid to the preparer of the Fannie Mae/Freddie Mac questionnaire?” Benson asks. “There should be a cap on the dollar amount of fees, or a nominal fee should be charged for the electronic transmission that is already owned by the seller or the developer.”

Experts report that some associations have been found charging thousands of dollars to potential borrowers for mere documents and disclosures, plus additional fees ranging from $75 to $1,000 just to complete questionnaires such as the ones Fannie and Freddie are requesting.

“One association in Chicago is charging potential borrowers $4,000 for a complete ‘condo package’ prior to closing,” Benson said. “If the documents reveal a looming undisclosed $50,000 special assessment associated with the purchase, and the buyer decides to walk away from the deal, there are no refunds of these monies.”

Before jumping blindly into ownership of a condo or HOA, Benson urges home shoppers to obtain a “Private Association Rating” – or PARScore – on the association. Through a proprietary algorithm, PARScore provides a standardized rating between 400 and 900. Financially healthy and well-run associations receive higher ratings while risky associations plagued with low bank balances, non-paying owners, special assessments, and lawsuits receive lower ratings.