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Subject: developers debt to HOA
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TerryT7
(Texas)

Posts:10


08/25/2019 2:01 PM  
I am interested in buying a home in which the developer has a loan to the HOA in the amount of $932,000 over a 3 year period. The HOA is over spending what is taken in monthly by approximately $25,000 per month which is covered by the developer. The developer is carrying this as a loan from the developer to the HOA. complete build out may not be for 3 or more years at which time I am estimating that the loan to the developer could be as much as $2,000,000. If there is a recession and sales drop who knows when complete build out occurs. Can I expect that the developer will have expectations of being paid back. Should I look for another place to build a home?
BillH10
(Texas)

Posts:397


08/25/2019 2:14 PM  
Terry, like many (most) developers, this one has set the monthly assessment too low in order to entice buyers.

I don't know if the developer can encumber the HOA for repayment, those are questions you should ask the sales agent or, better yet, hire an attorney to examine the association documents and render an opinion before you sign anything.

Sooner or later however, probably immediately after turnover, the owners in the Association can expect a significant increase in their monthly assessments as there will be no 'sugar daddy developer' in the background to cover the monthly shortfalls. $25K is a lot of income underrun relative to expenses, do you have any insight into what is taking place. How large is this association now, and at buildout?

JohnC46
(South Carolina)

Posts:8733


08/25/2019 3:05 PM  
Just walk on by and meet me at the corner.........
PestY


Posts:0


08/25/2019 3:07 PM  
Posted By TerryT7 on 08/25/2019 2:01 PM
I am interested in buying a home in which the developer has a loan to the HOA in the amount of $932,000 over a 3 year period. The HOA is over spending what is taken in monthly by approximately $25,000 per month which is covered by the developer. The developer is carrying this as a loan from the developer to the HOA. complete build out may not be for 3 or more years at which time I am estimating that the loan to the developer could be as much as $2,000,000. If there is a recession and sales drop who knows when complete build out occurs. Can I expect that the developer will have expectations of being paid back. Should I look for another place to build a home?





RUN

RUN FAST

RUN FAR
JohnT38
(South Carolina)

Posts:117


08/25/2019 3:35 PM  
Why even go there? Find a stable community and count your blessings. I commend you on reviewing their finances before buying. I did not do a good job of this when I bought and I could shoot myself for this.
MelissaP1
(Alabama)

Posts:8603


08/25/2019 4:58 PM  
I am not sure how you got this information. Also don't know what isn't making you run about a mile away from this. Where do you think the money will come from in 3 years? Dues and/or special assessments await. Do you really want in on that?

Former HOA President
TerryT7
(Texas)

Posts:10


08/25/2019 6:20 PM  
i asked for the financials and they were given to me.
should this data not be available to all people whom are wanting to build a home and join the HOA?
Building a home with a builder is one thing, but I know when you join a HOA, I know that I am entering into a agreement with the Developer and other HOA members. My first thought is that the current rate of shortfalls being covered by the developer are unsustainable. The Developer is calling the subsidies a loan on the books and I suspect would want to be paid back. The developer keeps digging a financial hole for the HOA which I think will cause issues on the build out of the community ever getting completed.
TerryT7
(Texas)

Posts:10


08/25/2019 6:20 PM  
i asked for the financials and they were given to me.
should this data not be available to all people whom are wanting to build a home and join the HOA?
Building a home with a builder is one thing, but I know when you join a HOA, I know that I am entering into a agreement with the Developer and other HOA members. My first thought is that the current rate of shortfalls being covered by the developer are unsustainable. The Developer is calling the subsidies a loan on the books and I suspect would want to be paid back. The developer keeps digging a financial hole for the HOA which I think will cause issues on the build out of the community ever getting completed.
SteveM9
(Massachusetts)

Posts:3362


08/25/2019 6:50 PM  
Might not be bad.....

Depends how it was set up......

Many developers will use the land/lots as collateral so if there are 200 acres and 200 lots, the land value would more than cover a 2 million loan. As the developer sells one house, he pays off more of the loan.

TimB4
(Virginia)

Posts:16481


08/26/2019 4:16 AM  
Posted By TerryT7 on 08/25/2019 6:20 PM

i asked for the financials and they were given to me.
should this data not be available to all people whom are wanting to build a home and join the HOA?




The data is available to members of the Association (i.e. after your purchase).
Many HOA's or sellers will provide this info if they buyer asks (most don't bother to ask).
A few States make it a requirement as part of the closing procedure (but many don't bother to read).



Posted By TerryT7 on 08/25/2019 6:20 PM

Building a home with a builder is one thing, but I know when you join a HOA, I know that I am entering into a agreement with the Developer and other HOA members. My first thought is that the current rate of shortfalls being covered by the developer are unsustainable. The Developer is calling the subsidies a loan on the books and I suspect would want to be paid back. The developer keeps digging a financial hole for the HOA which I think will cause issues on the build out of the community ever getting completed.




Your thoughts are, in my opinion, accurate.

If it were me, I would look elsewhere.
MelissaP1
(Alabama)

Posts:8603


08/26/2019 5:00 AM  
A developer makes their money by selling their properties. Let's say they buy 101 acres. They break it up into 100 lots and 1 for clubhouse/pool/amenities. They charge 100K to purchase the lots. The owners hire a builder which may or may not be related to the Developer. Once built out the Developer turns over the HOA to the owners.

So the developer may offer some incentives of keeping dues low or offering amenities like pool/clubhouse etc. Which come out of their pocket as they are the "HOA". It may be they need to float a loan to cover amenities and lower dues till they are fully built out. Depending on how they are set up, the loan may not be a bad thing.

The real issue comes when they are fully built out and turnover. The Homeowners have to take on the HOA's debts. Which may not be the developer's loan. The owners do have to take care of the amenities. It may be they need to do roads and other common elements as well. So the owners will need a reserve fund and daily operation fund.

If the current dues aren't cutting that future budget, then you and your fellow owners pick up the tag. So you may be happy to build and move into this place. Just be aware that dues will be changing. Can you afford the additional dues that it may require in 3 years? It could be a significant raise. Something to consider before moving in.

Former HOA President
RichardP13


Posts:0


08/26/2019 6:58 AM  
Posted By MelissaP1 on 08/26/2019 5:00 AM
A developer makes their money by selling their properties. Let's say they buy 101 acres. They break it up into 100 lots and 1 for clubhouse/pool/amenities. They charge 100K to purchase the lots. The owners hire a builder which may or may not be related to the Developer. Once built out the Developer turns over the HOA to the owners.

So the developer may offer some incentives of keeping dues low or offering amenities like pool/clubhouse etc. Which come out of their pocket as they are the "HOA". It may be they need to float a loan to cover amenities and lower dues till they are fully built out. Depending on how they are set up, the loan may not be a bad thing.

The real issue comes when they are fully built out and turnover. The Homeowners have to take on the HOA's debts. Which may not be the developer's loan. The owners do have to take care of the amenities. It may be they need to do roads and other common elements as well. So the owners will need a reserve fund and daily operation fund.

If the current dues aren't cutting that future budget, then you and your fellow owners pick up the tag. So you may be happy to build and move into this place. Just be aware that dues will be changing. Can you afford the additional dues that it may require in 3 years? It could be a significant raise. Something to consider before moving in.



THAT IS the biggest bunch of horses%*&t I have EVER heard in my life.
SteveM9
(Massachusetts)

Posts:3362


08/26/2019 7:57 AM  
Sounds normal to me. What part sounds wrong?
RichardP13


Posts:0


08/26/2019 8:46 AM  
I have a conference in a couple of hours at the Reagan Library. I will respond this evening.
BarbaraT1
(Texas)

Posts:239


08/26/2019 12:12 PM  
I encountered this scenario with a few properties I managed. In each of those cases, the developer "forgave" the loan at turnover. Sometimes in exchange for the new homeowner board agreeing to accept the common properties as is and not demanding promised amenities. But, I wouldn't count on this happening in your case and agree with the other posters that you should keep shopping.
JZ2
(Florida)

Posts:52


08/26/2019 12:22 PM  
No one here can really answer that for you.

$2M is a lot of money, and state law may or may not allow the developer to collect that from the homeowner-membership. My first suggestion would be to consult an experienced HOA attorney in your area so you can get an answer to that threshold question.

If the developer loan is indeed collectible from the homeowner-membership under state law, then your next step is determining whether the additional personal liability is "worth it" to you and your family.

For example, if the community will have 5000 homes in it at full build-out, that's not nearly as significant a concern ($400.00 per home) as it would be if only 500 homes were planned ($4,000.00 per home). The richness in the mix of amenities -- and the additional value that amenity mix imparts to your home -- may or may not be "worth it."

Good luck!
TerryT7
(Texas)

Posts:10


08/26/2019 1:05 PM  
There are less than 100 homes built thus far with a developer loan near $900k and monthly short falls in the order of $20-25K a month.
The total build out will be around 300 homes and my projections put the developer loans at $1.5 to $2MM at build out.
That would be about $6500/ house that would have to be paid back provided the developer wanted the repayment. Sounds untenable to me.
BillH10
(Texas)

Posts:397


08/26/2019 1:12 PM  
Terry, what in heaven's name is causing a shortfall of $25K per month in an association of 100 homes? What are the monthly expenses?
TerryT7
(Texas)

Posts:10


08/26/2019 1:46 PM  
landscaping and water usage
NpS
(Pennsylvania)

Posts:3762


08/26/2019 2:11 PM  
I bought my house new over 30 years ago. The monthly fees were around $100. I looked at all the things that were promised and I laughed. There was no way that anything near that amount was going to cover this and that and whatever. My conclusion - When the money is needed, I'll have to pay up - but for now, I'd rather have that money in my own pocket than put it in the hands of some BOD who might piss it all away.

Looking back, I was wrong. I was only thinking about myself. There were those who were pushing themselves financially to meet the $100 monthly obligation. They might not be in a position to meet a greater obligation.

Then the mortgage meltdown happened. I learned a lot about what happens when people have no equity in their homes.

You brought up some risks that are even worse than what I faced. Buying into a 1/3 developed HOA. $2M of pre-turnover debt. Yet, I think you have a common situation to the one I had back then.

Your expectation of what you might need to contribute is probably very different than many of your neighbors. You see the debt as something you might need to pay. Your neighbors might see the debt as something the HOA is responsible for, not them. You can tell them that they are the HOA all you want, but they just won't see it - and will be angry when told that more money is needed.


Sikubali jukumu. Read all posts at your own risk.
SueW6
(Michigan)

Posts:586


08/26/2019 2:16 PM  
Are you confusing “ loan” with “investment” still on the books of this private corporation, which is still in its building phase?

How on earth would 100 homes have deficit spending each month at the level you are talking about?

The developer will re-coop his investment when his product (homes) sell.



TerryT7
(Texas)

Posts:10


08/26/2019 4:36 PM  
landscaping and water, mowing and watering, yes that is correct.
PestY


Posts:0


08/26/2019 4:56 PM  
Terry,

You need the stress of buying into a potential disaster why exactly ?
LetA
(Nevada)

Posts:789


08/26/2019 5:07 PM  
Posted By TerryT7 on 08/26/2019 1:46 PM
landscaping and water usage





$25,000 per month?? What in the name of sweet Sunday Jesus is going on?? How much water is being used? and what are they paying the landscapers?? DAYAMMMMM
TerryT7
(Texas)

Posts:10


08/26/2019 5:12 PM  
$270K/year landscaping
$190,000/ year water usage
LetA
(Nevada)

Posts:789


08/26/2019 7:53 PM  
I would honestly find a place with a much stable HOA to buy in. Truth be told, the developer is floating loans to himself via the HOA.
Those numbers for landscaping and water. HOLY SHEET how many homes are you talking about/ Either way, someone there needs to look into using grey water instead of potable water for landscaping.
RichardP13


Posts:0


08/26/2019 8:03 PM  
Water in Los Angeles is expensive, about $11.00 per unit (748 gallons). In Texas, it is closer to $16.00 for the same amount.
RichardP13


Posts:0


08/26/2019 8:08 PM  
Posted By TerryT7 on 08/26/2019 5:12 PM
$270K/year landscaping
$190,000/ year water usage



I would be curious if these are detached, single family homes and how many acres. Landscaping is $22.5 per month, while water is $15K. Lots of acreage requires lots of landscaping and lots of water. Deficit comes downs once more homes are sold. I would also guess the HOA might be subsidizing some of the expenses or dues.
SamE2
(New Jersey)

Posts:162


08/27/2019 7:46 AM  
Shouldn't the developer be paying for the 200 lots that they own are in the process of selling?
TerryT7
(Texas)

Posts:10


08/27/2019 9:03 AM  
I did some investigating.
The median cost to maintain a 18 hole golf course is less than $1MM
Colleges landscaping maintenance as low as $450K for 240 acre campus
RichardP13


Posts:0


08/27/2019 10:20 AM  
Posted By TerryT7 on 08/27/2019 9:03 AM
I did some investigating.
The median cost to maintain a 18 hole golf course is less than $1MM
Colleges landscaping maintenance as low as $450K for 240 acre campus



I am guessing either this community may not be the right fit for you, or HOA's, in general, might not be the right fit.
JZ2
(Florida)

Posts:52


08/27/2019 12:14 PM  
Run!
MelissaP1
(Alabama)

Posts:8603


08/27/2019 4:37 PM  
Did not mention this is a golf community. Is the HOA a for-profit or a non-profit? Is it worth the ability to have access to a golf club?

Former HOA President
JZ2
(Florida)

Posts:52


08/27/2019 4:41 PM  
NpS

//I bought my house new over 30 years ago. The monthly fees were around $100. I looked at all the things that were promised and I laughed. There was no way that anything near that amount was going to cover this and that and whatever. My conclusion - When the money is needed, I'll have to pay up - but for now, I'd rather have that money in my own pocket than put it in the hands of some BOD who might piss it all away.

Looking back, I was wrong. I was only thinking about myself. There were those who were pushing themselves financially to meet the $100 monthly obligation. They might not be in a position to meet a greater obligation.

Then the mortgage meltdown happened. I learned a lot about what happens when people have no equity in their homes.//

Good point, and one worthy of the attention of any prospective homeowner in an HOA-governed community.

The reality is, whether one realizes it or not (and virtually none do), a homeowner is a "partner" with every other homeowner in your community. And just like a commercial partnership, when your HOA needs additional capital to fund its obligations, you and your "partners" will be expected to ante up (or suffer the consequences).

When there is a large "developer loan obligation" hovering over everyone's heads that eventually needs to be paid, some will be able to afford to pay their "partner" capital call, and other partners will default. And guess what? Those defaults will somehow need to be covered by the non-defaulting "partners" (at least, until they are collected from the defaulting "partners" -- if and when that occurs).

Developers love to showcase the shiny amenities... but not so much their books. It is one's duty as a prospective homeowner to know precisely what he or she is buying into...
TerryT7
(Texas)

Posts:10


08/27/2019 4:50 PM  
It is not a golf community,
I was just making comparisons for the cost of maintaining a golf course.
I guessing I could maintain a 9 hole course for the price of lawn and watering in this HOA run by the developer.
NpS
(Pennsylvania)

Posts:3762


08/27/2019 7:25 PM  
Posted By JZ2 on 08/27/2019 4:41 PM


//NpS. There were those who were pushing themselves financially to meet the $100 monthly obligation. They might not be in a position to meet a greater obligation. Then the mortgage meltdown happened. I learned a lot about what happens when people have no equity in their homes.//

Good point, and one worthy of the attention of any prospective homeowner in an HOA-governed community.

The reality is, whether one realizes it or not (and virtually none do), a homeowner is a "partner" with every other homeowner in your community. And just like a commercial partnership, when your HOA needs additional capital to fund its obligations, you and your "partners" will be expected to ante up (or suffer the consequences).

When there is a large "developer loan obligation" hovering over everyone's heads that eventually needs to be paid, some will be able to afford to pay their "partner" capital call, and other partners will default. And guess what? Those defaults will somehow need to be covered by the non-defaulting "partners" (at least, until they are collected from the defaulting "partners" -- if and when that occurs).



Ever since the mortgage meltdown, I've kept a spreadsheet that I don't share with anyone else. On the spreadsheet I track the date of sale, the purchase price, and the mortgage amount on every house. All public data.

I'm amazed that, even after all the problems from the meltdown, mortgages for 95+% of the purchase price are still being issued. The spreadsheet gives me a handle on how vulnerable my community is to even a minor meltdown. J is correct when he says that the non-defaulters will have to carry the defaulters.

Terry. If you're still interested in the property after all the comments against it in this thread, you might want to spend a few hours and build a spreadsheet for that community. It might tell you a lot about what risks you're buying into.

Sikubali jukumu. Read all posts at your own risk.
RichardP13


Posts:0


08/27/2019 11:02 PM  
Posted By NpS on 08/27/2019 7:25 PM
Posted By JZ2 on 08/27/2019 4:41 PM


//NpS. There were those who were pushing themselves financially to meet the $100 monthly obligation. They might not be in a position to meet a greater obligation. Then the mortgage meltdown happened. I learned a lot about what happens when people have no equity in their homes.//

Good point, and one worthy of the attention of any prospective homeowner in an HOA-governed community.

The reality is, whether one realizes it or not (and virtually none do), a homeowner is a "partner" with every other homeowner in your community. And just like a commercial partnership, when your HOA needs additional capital to fund its obligations, you and your "partners" will be expected to ante up (or suffer the consequences).

When there is a large "developer loan obligation" hovering over everyone's heads that eventually needs to be paid, some will be able to afford to pay their "partner" capital call, and other partners will default. And guess what? Those defaults will somehow need to be covered by the non-defaulting "partners" (at least, until they are collected from the defaulting "partners" -- if and when that occurs).



Ever since the mortgage meltdown, I've kept a spreadsheet that I don't share with anyone else. On the spreadsheet I track the date of sale, the purchase price, and the mortgage amount on every house. All public data.

I'm amazed that, even after all the problems from the meltdown, mortgages for 95+% of the purchase price are still being issued. The spreadsheet gives me a handle on how vulnerable my community is to even a minor meltdown. J is correct when he says that the non-defaulters will have to carry the defaulters.

Terry. If you're still interested in the property after all the comments against it in this thread, you might want to spend a few hours and build a spreadsheet for that community. It might tell you a lot about what risks you're buying into.




I was an executive with Countrywide Financial from 2003-2008. The LTV or the CLTV had NOTHING to do with the mortgage meltdown. Sorry, the spreadsheet exercise was a waste of your time.
MelissaP1
(Alabama)

Posts:8603


08/28/2019 4:50 AM  
Explained by someone who worked at Countrywide.... The one company most known for selling those loans that contributed to the bubble bursting...

Former HOA President
JohnT38
(South Carolina)

Posts:117


08/28/2019 7:34 AM  
I can tell where this thread is going. Please hold off on further discussion until I grab some popcorn...
RichardP13


Posts:0


08/28/2019 7:54 AM  
Posted By JohnT38 on 08/28/2019 7:34 AM
I can tell where this thread is going. Please hold off on further discussion until I grab some popcorn...



Have you gotten your popcorn?
JohnT38
(South Carolina)

Posts:117


08/28/2019 8:22 AM  
I sure have. Let the fun begin!
PestY


Posts:0


08/28/2019 8:30 AM  
8766-American-Odyssey-125
RichardP13


Posts:0


08/28/2019 8:45 AM  
Posted By MelissaP1 on 08/28/2019 4:50 AM
Explained by someone who worked at Countrywide.... The one company most known for selling those loans that contributed to the bubble bursting...



In another post, I called you ignorant. That is as true a statement as one can make. You live in your little world and have no clue what goes on elsewhere, until someone tells you.

What caused the meltdown, a lot of things. Subprime loans were well performing loans, but SISA loans were sh*t. That was in all types of loans, Subprime, Alt-A and Prime. Credit rating agencies (Standard and Poor, Moody's, Fitch's) did not do their jobs. MBS's were not rated correctly, worse, the people who bought these pools never did their due diligence, kinda like homeowners buying homes and moving into HOA's.

Bill Clinton said all Americans should have the ability to purchase a home. Home ownership is NOT for everyone. After a number of recessions, municipalities started shifting the infrastructure of homes onto homeowners through HOA's. Now 53% of Americans live in some form of HOA, which might have a set of rules, but who watches over homeowners, no one.

In 2007, we had millions upon millions of loans put into MBS's that no one knew what was in them, rated by agencies that didn't give a rat's ass, insured by only ONE company, AIG. Everyone was looking for a good time and world all woke up on the same day.

Will this happen again, probably. When, sooner than we think. Yesterday, Trump started the process to return Fannie Mae and Freddie Mac back to the private sector. This is how the ball got rolling in the first place. And Trump is the last person to weigh in on this. His Trump Mortgage failed when others were making boat load of money. Countrywide even denied him a line of credit.

In April 2008, I moved into a new home. 10 days later I was laid off at Countrywide. Never missed a mortgage payment or HOA dues. In one year, the house lost 40% equity. I had a VA loan on the house. If I would have put 20% down, it would have wiped out in a heart beat. I have bought three homes in my lifetime, and not once did I put any money down. Same holds true for a car.
NpS
(Pennsylvania)

Posts:3762


08/28/2019 10:34 AM  
Posted By RichardP13 on 08/27/2019 11:02 PM
Posted By NpS on 08/27/2019 7:25 PM
Posted By JZ2 on 08/27/2019 4:41 PM


//NpS. There were those who were pushing themselves financially to meet the $100 monthly obligation. They might not be in a position to meet a greater obligation. Then the mortgage meltdown happened. I learned a lot about what happens when people have no equity in their homes.//

Good point, and one worthy of the attention of any prospective homeowner in an HOA-governed community.

The reality is, whether one realizes it or not (and virtually none do), a homeowner is a "partner" with every other homeowner in your community. And just like a commercial partnership, when your HOA needs additional capital to fund its obligations, you and your "partners" will be expected to ante up (or suffer the consequences).

When there is a large "developer loan obligation" hovering over everyone's heads that eventually needs to be paid, some will be able to afford to pay their "partner" capital call, and other partners will default. And guess what? Those defaults will somehow need to be covered by the non-defaulting "partners" (at least, until they are collected from the defaulting "partners" -- if and when that occurs).


Ever since the mortgage meltdown, I've kept a spreadsheet that I don't share with anyone else. On the spreadsheet I track the date of sale, the purchase price, and the mortgage amount on every house. All public data.

I'm amazed that, even after all the problems from the meltdown, mortgages for 95+% of the purchase price are still being issued. The spreadsheet gives me a handle on how vulnerable my community is to even a minor meltdown. J is correct when he says that the non-defaulters will have to carry the defaulters.

Terry. If you're still interested in the property after all the comments against it in this thread, you might want to spend a few hours and build a spreadsheet for that community. It might tell you a lot about what risks you're buying into.


I was an executive with Countrywide Financial from 2003-2008. The LTV or the CLTV had NOTHING to do with the mortgage meltdown. Sorry, the spreadsheet exercise was a waste of your time.



Richard
My post was not about the cause of the meltdown.
Nor was my post about the people who lost their homes.
Nor was my post about the mortgage "professionals" who "helped" people get those loans.

No Richard, my post followed JZ's post which talked about the burden on the non-defaulters when homeowners are in default - not to the mortgage company - to the HOA. Something that the mortgage industry and everyone in it didn't give a crap about.

As to my spreadsheet, I have a reasonably good sense of who is going to be under pressure if the market slides.

It may be that when they go for a home improvement loan, they find that the best valuation they can get is less than what they paid. They're not going to default. But neither are they going to fix their homes as much as they could. Which is what I care about.

It may be that we are going to see more delinquencies, and maybe we need to be less aggressive in our spending til people can get caught up.

My conversation is about people being strapped. Yours is about a bad memory. But I think your view, by limiting yourself to what was going on inside the problem, totally misses what happened to the rest of us who didn't get bailed out and had to carry the burden of the financial hardship to our communities.

Sikubali jukumu. Read all posts at your own risk.
RichardP13


Posts:0


08/28/2019 1:45 PM  
First, the same people that couldn't make payments before are the same ones that won't the next time.

Mortgage companies didn't inflate home prices, realtors did.

How was it the responsibility of the mortgage company to look after the HOA's? They didn't set them up in the first place, maybe you should vent your anger against those people. There was talk of impound HOA dues, BUT who do you send it to, how much, what happens when it changes, any special assessments. Whole different can of worms, but not viable.

If you are going to do home improvement projects at the house and going to use the home as credit, you better have equity. That is the way it works. Our country doesn't save, that has been our mentality. Look at other countries. China sends people over with suitcases of cash that that have saved up.

Even though I lost my job, I was one of those that helped bail others out.

People should have known the risks of homeownership and the loans they were signing up for. The internet was up and running back then. They were more concerned about where they were going on vacation, having a new man cave and having to Escalates in their driveway. I don't feel sorry one bit.
JohnC46
(South Carolina)

Posts:8733


08/28/2019 2:05 PM  
Posted By RichardP13 on 08/28/2019 1:45 PM
First, the same people that couldn't make payments before are the same ones that won't the next time.

Mortgage companies didn't inflate home prices, realtors did.

How was it the responsibility of the mortgage company to look after the HOA's? They didn't set them up in the first place, maybe you should vent your anger against those people. There was talk of impound HOA dues, BUT who do you send it to, how much, what happens when it changes, any special assessments. Whole different can of worms, but not viable.

If you are going to do home improvement projects at the house and going to use the home as credit, you better have equity. That is the way it works. Our country doesn't save, that has been our mentality. Look at other countries. China sends people over with suitcases of cash that that have saved up.

Even though I lost my job, I was one of those that helped bail others out.

People should have known the risks of homeownership and the loans they were signing up for. The internet was up and running back then. They were more concerned about where they were going on vacation, having a new man cave and having to Escalates in their driveway. I don't feel sorry one bit.




A lot I agree with especially: the same people that couldn't make payments before are the same ones that won't the next time.
LetA
(Nevada)

Posts:789


08/29/2019 5:34 AM  
Richard, there were a good number of people, majority in Nevada that treated their home like an ATM machine. They went from having a home worth $150,000.00 one day and then next day it was worth $400,000.00.
Those people refi'ed, cashed out and went on a spending spree. Granted the banks played a role in this mess.
RichardP13


Posts:0


08/29/2019 6:41 AM  
Home is based on value.

Value is what someone is willing to pay for a home.

Equity is value less what is owed.

Triva question. Homeowners in Minnesota, from 2003-2008 (and maybe even today) had the best credit scores, BUT the worst PRIME lending rate. Why?
MelissaP1
(Alabama)

Posts:8603


08/30/2019 5:02 AM  
No wonder you were let go... 1st off Realtors do NOT set house prices!!! Realtors are basically "Used car salespeople" of houses. It's like going to a car lot and having the sales person set the price of a car. Doesn't make any sense. A realtor put the price a little high for bargaining terms. Rarely anyone purchases a home at asking price unless that is what the local reality is like. (Think New York City, L.A. etc...).

The home has to be assessed and value set by 3rd party. Who they are paid to go through and evaluate what the house is worth. That ASSESSMENT is then sent to the bank. The bank then approves the loan amount based on that assessment. They aren't going to loan a million dollars to a house worth 500K.

To blame the customers for the collapse is a classic mortgage industry move. "Well if these broke un-credited people wouldn't keep coming to our door asking for a home loan, then we wouldn't have this issue". It's more like "Well you can't afford a home? Let's find a "program" that will allow you to do this". Let's get you into an "ARM". The rates are low now but MAY raise in the future... Then they sell the loan off to another company and that rate increases...

So no I do not blame realtors for the bubble popping. I don't think "Home Value" is what someone will pay for a house. It's based on REAL #'s, condition, and location. My house listed at 75K. The buyer willing to pay the 75K. However, once it was assessed it was only worth 74.5K. So I had to cut my price $500 and pay them the difference. So explain that if your theory holds water....

Former HOA President
JohnT38
(South Carolina)

Posts:117


08/30/2019 7:42 AM  
Melissa, I just have to ask. Did you even read what Richard wrote or is there another problem? He said, "Value is what someone is willing to pay for a home."
How can you possibly twist this into him saying, "...Realtors do NOT set house prices!!!"?
RichardP13


Posts:0


08/30/2019 8:26 AM  
Posted By MelissaP1 on 08/30/2019 5:02 AM
No wonder you were let go... 1st off Realtors do NOT set house prices!!! Realtors are basically "Used car salespeople" of houses. It's like going to a car lot and having the sales person set the price of a car. Doesn't make any sense. A realtor put the price a little high for bargaining terms. Rarely anyone purchases a home at asking price unless that is what the local reality is like. (Think New York City, L.A. etc...).

The home has to be assessed and value set by 3rd party. Who they are paid to go through and evaluate what the house is worth. That ASSESSMENT is then sent to the bank. The bank then approves the loan amount based on that assessment. They aren't going to loan a million dollars to a house worth 500K.

To blame the customers for the collapse is a classic mortgage industry move. "Well if these broke un-credited people wouldn't keep coming to our door asking for a home loan, then we wouldn't have this issue". It's more like "Well you can't afford a home? Let's find a "program" that will allow you to do this". Let's get you into an "ARM". The rates are low now but MAY raise in the future... Then they sell the loan off to another company and that rate increases...

So no I do not blame realtors for the bubble popping. I don't think "Home Value" is what someone will pay for a house. It's based on REAL #'s, condition, and location. My house listed at 75K. The buyer willing to pay the 75K. However, once it was assessed it was only worth 74.5K. So I had to cut my price $500 and pay them the difference. So explain that if your theory holds water....



ABSOLUTELY UNBELIEVABLE!

I call Trump out for his BS and you are called out as well.
RichardP13


Posts:0


08/30/2019 9:25 AM  
1. I want to sell my house. I go to a Realtor to have it listed. Where do they come up with a price? From the seller? I don't think so. The expert in this field is the Realtors and they will tell you what they feel your house is worth and/or what they feel they can sell your house for. The seller must agree to the price set and they must agree to the price it is sold at.

2. Your $75K wouldn't cover half my driveway. Anyway, 10 offers come in on the house. So we have a bidding war. Half are for cash. Let's narrow down to two buyers, both paying 30% over asking, one all cash, the other 40% cash down. If the offer for all cash is taken, the house is NOT appraised, as it is used for a mortgage loan.

3. The offer for 40% down is taken because it is in a HOA with a 2 year rental restriction and because the all cash offer was for investment purposes. The house was listed for $500K but sold for $650K. Appraisal is done and the value is $500K. In Melissa world, the seller would give back the $150K, but that's not how it works.

What happened? The buyer obtains loan for $400K, The buyer has to come up with $250K to close. They had alreday deposited $150K when they signed the purchase agreement. They need to come up with the other $100K at close of escrow. The seller profits and the agent(s) make $39K.

4. Home is shown as selling for $650K, not what it is worth. This house had a value to someone of $650K. During the 2008 recession, my house lost $250K in value. Did I lose a dime, nope, it is only realized when you sell. Just like the stock market.

Loans rates DID NOT increase because the Note was resold to another lender. It changed based on the terms of the original promissory note. I have an ARM loan on two of my rentals that were taken out in 2008. Both are lower by half now. Yes, rates can go up, they can go down, or they can stay the same.

If we tell people here they should have done their research to know what they were getting into with a HOA, why doesn't that hold true for the loan they signed up for. Who's signature is on the promissory note, not the lender, the person(s) who promised to repaid the loan.
BarbaraT1
(Texas)

Posts:239


08/30/2019 9:56 AM  
Don't you two have your own thread for this bs?
NpS
(Pennsylvania)

Posts:3762


08/30/2019 10:11 AM  
Posted By RichardP13 on 08/28/2019 1:45 PM
First, the same people that couldn't make payments before are the same ones that won't the next time.

Mortgage companies didn't inflate home prices, realtors did.

How was it the responsibility of the mortgage company to look after the HOA's? They didn't set them up in the first place, maybe you should vent your anger against those people. There was talk of impound HOA dues, BUT who do you send it to, how much, what happens when it changes, any special assessments. Whole different can of worms, but not viable.

If you are going to do home improvement projects at the house and going to use the home as credit, you better have equity. That is the way it works. Our country doesn't save, that has been our mentality. Look at other countries. China sends people over with suitcases of cash that that have saved up.

Even though I lost my job, I was one of those that helped bail others out.

People should have known the risks of homeownership and the loans they were signing up for. The internet was up and running back then. They were more concerned about where they were going on vacation, having a new man cave and having to Escalates in their driveway. I don't feel sorry one bit.


Richard

Not sure why you're so defensive. I'm talking about collateral effect on HOAs, and you don't want to go there.

Here's a link to a CAI press release from 2011 about the results of a survey they did on the effect of the mortgage meltdown on HOAs. As you can plainly see, many HOAs reduced reserved contributions, delayed repairs, etc. Plain and simple. HOAs were collaterally damaged.

If you have a better way for an HOA BOD to assess their vulnerability to a modern day mini-meltdown, fine. Share it.

https://www.caionline.org/PressReleases/Pages/CommunityAssociationsHitHardbyHousing,EconomicSlump.aspx

Sikubali jukumu. Read all posts at your own risk.
PestY


Posts:0


08/30/2019 10:19 AM  
the bucket is overflowing
RichardP13


Posts:0


08/30/2019 11:39 AM  
That survey was done 8 years ago. The meltdown affected a lot of people WORLDWIDE, it wasn't just HOA's. This also goes to the topic of Notice to Association of Mortgage.

The lender NEVER had an obligation to pay HOA dues. The owner of the property would have that obligation. If it went back to the bank, then they would be responsible. So, did YOUR HOA the bank that now owned the property ever send them a bill? In your closing documents, ever come across something that has the correct HOA name and also the name and address of where to send HOA payments. NOPE.

The information was out there for people to use. You can lead a horse to water, you can't make them drink it.

The real problem, IMHO, is there are WAY too many HOA. People are forced into them, because that is the only housing cities will approve. You pay a property tax on fire and police and road, etc., but now those responsibilities, outside of fire, are relegated to the HOA, without a decrease in your property tax.

Where I lived from 2008-2015, we went through the meltdown just like everyone else. The one difference, our homes were built in 2001-2003 when prices were considerable lower. During 2008-2015, we had a large Accounts Receivable, $250K and more, but we never had to raise dues, had $1.5M in reserves had a $10K annual social budget, we survived nicely.

You were concerned, because the owner's home valuation was there, they couldn't fix up their home. That was one of the problems, equity stripping. Keep borrowing as the home price increases and wonder what happened when it crashes down.

How can we help HOA's in trouble. I sent a proposal to a couple of state legislators of an idea I came up with. There are about 60,000 HOA's in California and let's say for argument sake that each HOA averages 50 homes. The is 3M units. Eazch unit pays monthly into a state HOA reserve fund .25. That is $750,000 monthly or $9M annually. Raise that to $1.00 and you have $36M. It won't go anywhere, but it is doable.


Larger HOA's can survive these types of financial hits. Small ones will get eaten alive. They would be more vulnerable if the homes were sold just prior to a downturn.

My HOA's know where the mortgages are held the day I took over. I update when necessary. Will the next one be as bad, maybe not. Are the HOA anymore prepared, I'll let you answer that. If you are going to depend on someone doing your work, I know the answer.

Tough Love.
PestY


Posts:0


08/30/2019 12:32 PM  
--- FINALLY ---

rationality

from Richard, no less ...
JohnC46
(South Carolina)

Posts:8733


08/30/2019 1:17 PM  
Reading some of this makes me realize how fortunate I was. I had lived in several HOA's so I was no stranger to how they worked. I was also nervous when the declarant was still involved as you never knew what they might do. When I first drove through my present HOA it was about 70% complete. Small, private, patio homes with no amenities. I liked the no amenities as they are often a source of major issues. I met with the site sales agent and I had wanted a copy of the Covenants, Bylaws, R&R's, and any financial reports. Well to my surprise the HOA was running financially positive and even had a Reserve Fund. I jumped at the chance and bought in.

I was on the Declarant appoint Advisory BOD and on the first BOD at the turnover some 4 years ago. I lost the next BOD election to a faction that felt I was to brunt and confrontational. The next year I was asked to run by several including BOD Members. I refused based on being a little pi$$ed that I had not been elected the year before and I did not care for some on the BOD. The next year I ran and won a two year term with a landside. I was re-elected at the last Annual Meeting for another 2 year term. Each year I have held on to VP & Treasurer position and I work closely with and fully supported the Presidents. The Pres and I basically run the place. The other 3 BOD members do little. Of course I did some behind the scenes politicking to be sure who got elected President.....LOL

Back to the OP if she has not given up on this thread. The large debt the HOA owes the developer scares the he!! out of me and no matter how many promises made, it is there.

RichardP13


Posts:0


08/30/2019 1:34 PM  
I would have to see the numbers. How many homes are there now and at build out. Exactly what financial were they looking at.

If you don't feel comfortable. move on.
TerryT7
(Texas)

Posts:10


08/30/2019 1:49 PM  
I appreciate everyone's comments. My wife and I really like this home, that is why I decided to initiate this conversation. I have since found out that the developer converted his annual subsidy for HOA shortfalls to a loan to the HOA last year. As much as we would love to build this home in this subdivision, with $900K in debt to the HOA and shortfalls of 20-25K per month as a loan to the HOA, i find it untenable to build here. The declarant has changed the provisions in the covenant to allow him to convert his subsidies to a loan after the were declared as a subsidy.I like things in simple terms, It sure makes me nervous that someone else is writing a check and expecting me to cash it.
No Bueno! I even thought about asking the developer to guarantee in writing that they would forgive any HOA loans made to the HOA . Then, I thought, what is the point of that. I already know the answer.
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