Where readers ask and we (the community) try to answer:
I have been looking at your blog, quite a while, very useful. Thanks for all the work.
I have a question regarding refinancing, and hopefully you or your readers can help me.
I am refinancing with Wells Fargo with a locked 30 year fixed for a condo in SOMA. After all the word processing, Wells asked me for the HOA insurance contact, which I provided.
Now, my loan is on hold and cannot be approved because my HOA insurance was unwilling to add a mortgage clause by Wells. In general, the HOA insurance company only issued the certification for proof that the building is fully covered, no [declaration] page would be issued. (Which make sense to me, as HOA insurance policy covered the building, but not individual unit.) I understand, based on the information I found that some HOA will offer, but some don’t.
So now, here is my question, I have no control over the HOA insurance as an individual owner, I cannot make them issue the [declaration] page that Wells asks for, and Wells is unwilling to accept the certification, which worked in 2008 (my next door refinanced with Wells in 2008 with the certificaiton).
I am wondering whether this is a trick from Wells fargo to reject my loan application or if I should seek the property management/ HOA board to revise the HOA insurance policy? Or even if I should seek legal advice, because Wells is requiring some documentation way beyond my controls and making excuses.
Darn fine question! From what I can understand there is a miscommunication regarding the insurance declaration page? If that is the case, I’d simply work on getting that filled out to the satisfaction of Wells Fargo. It shouldn’t be that big of a deal, and you might just be talking to the wrong people at your HOA. If that’s not the case, you’ll have to clarify a bit. Regardless, I do not think you’d have much luck advising the HOA to modify the entire insurance policy for the entire building, and I doubt Wells is playing some kind of trick, but I’ve been known to be wrong.
Maybe “the banker” or another qualified loan expert could shed some light in the comments below.
Thanks for reading and thanks for your email.
[Update: Answer from "the Banker" that works at one of the remaining large banks and is definitely "in the trenches": "The HOA should not make the decision on adding a mortgagee clause, this should be the responsibility of the Insurance Agent who provides the coverage for the Condo. Part of your HOA fees are paying for the Insurance, so my advice would be to start there, call the insurance company yourself and have them add Wells Fargo as a Mortgagee, this has always been a lender requirement.
Now, perhaps the second part of your post. There have been some radical and rapid changes in regard to condo project guidelines, project requirements, and pricing add-ons. For the sake of simplicity, here are some of the key changes that have implemented, by most, if not all Lenders. One note, these new Rules and Requirements have been issued by Fannie Mae and Freddie Mac, so direct from the Government agencies.
-Only 10% ownership by one single entity
-No more than 20% commercial usage
-Up to 70% Presale Requirements, new construction
-Price add on’s for Loan to Values above 75%, usually .75 in price, not rate
-Delinquent HOA’s of more than 30 days cannot be greater than 15%
-Owner occupancy requirements, 51% and above
There are exceptions to the rules, but from what I have seen this year, they are few and far between.
I hope this helps and good luck."]