Big in 2012 and 2013
Where are the federal and state
regulatory trends taking us?
What we’re here to talk about…
• What has happened in 2012 and what will
happen in 2013
– Regulatory Dynamic
– Federal Issues
– State Issues
– Trends
The Challenge:
The rules that determine:
Who gets a mortgage
For what type of home
In what type of community
Will dramatically change during 2012 and 2013
2013– Uncertainty is King
Feds
• Underwriting criteria for
associations (FHA, QM,
QRM)
• Focus on consumer
protections (collections,
REO)
• Regulatory impact on CA
practices
States
• Limitations on
assessment collection
powers
• Regulation of transfer
fees
• Divergent from feds?
Federal Issues
The Federal Issue Horizon
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Mortgage Standards
Condominium Project Approval Standards
Bank Owned and Abandoned Properties
Bulk Sales of Real Estate Owned (REO) and Distressed
Mortgages
• Short Sale Standards
• Refinancing Opportunities for Underwater Borrowers
• Integrity of the Association Model
Mortgage Standards
• Qualified Mortgage Rule (QM) & Qualified
Residential Mortgage (QRM) Rule
• Improved mortgage disclosures
– Know Before You Owe initiative
– All mortgage loans meet new criteria—no
more regulatory gaps
– Ability to Repay Standard
Mortgage Standards
Impact on associations
• New scrutiny of association assessments
– Assessment increases
– Special assessments
– Other fees (read transfer fees)
• Potential use of mortgage standards to change association
business practices
– Transfer fees
– Delinquencies and association foreclosures
Condominium Project Approval
Standards
• FHA Condo Project Certification Guidelines – Mortgagee
Letter Released Today
– Delinquent assessment change from 30-60 days
– Investor owned properties; increased threshold to 50% may be
investor owned
– Fidelity Bond requirement change
– Submittal attestation change
• Fannie Mae, Freddie Mac and FHA require minimum
standards before evaluating the credit worthiness of
borrowers
• Interpretation of Fannie Mae, Freddie Mac and FHA
requirements by lenders
Bank Owned and Abandoned Properties
• Federal vs State Laws
• CAI emphasizes the following three concerns
– Delays in foreclosure and taking title after a foreclosure
– Delay in payment of association assessments due on bank
owned properties
– Lender and mortgage servicer refusal to maintain properties
during and after foreclosure
REO Assessments
• REO = Real Estate Owned
• REO is a loss leader for banks
– Costly to keep up property
– Non performing asset
– #1 goal is to move the property for the least cost possible
• Failure to pay association assessments
– Servicers overwhelmed
REO Assessments
Impact on homeowners
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Vacant and abandoned properties
Health, safety & fire hazards
Higher assessments or special assessment to cover lost
revenue (penalizes those who continue to remain up-todate on their assessments)
Reduced services/amenities
Lower property values for the community
QM/QRM rules may prevent the sale of property or
refinancing of mortgages
REO Assessments
Impact on Associations
• Higher delinquency rates that could violate Fannie Mae,
Freddie MAC, and FHA condo rules
• Reduced income
– Deferred maintenance
– Reduced services
– Assessment/reserves adjustments
• Aggressive collections
• Association initiated foreclosures
• Increased reputation risk
Federal REO Disposal
• At the end of the 2nd Quarter—Fannie, Freddie & HUD have
202,765 REO properties
• In 2011 federal regulators asked for ideas on how to sell REO
in bulk
• Agencies are bulk sales of REO for use as rentals and rent to
own
• Goal is to move properties back into circulation to lower
costs and preserve asset values
Federal REO Disposal
Impact on homeowners
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Properties in productive use limits distressed sales
Payment of assessments
Higher numbers of rentals means more resident turnover
Bulk sales can lead to large number of investor-owned
properties
• Condos exposed to other risks
– Violation of Federal guidelines
– Investor controlled association
Federal REO Disposal
Impact on associations
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Association knows the owner
Potential for improved fiscal health
Reduces hazards and other community risks
Bulk sales may subject properties to certain federal policy
goals
• Bulk sales may lead to less owner influence on board and
association operations
• Enforcing CC&Rs
• First bulk sale made earlier this week in Florida to Pacifica
for 669 units.
Short Sale Standards
• A borrower is allowed to sell the home for less than the
value of the existing mortgage.
• Fannie Mae and Freddie Mac announced new procedures to
increase the use of short sales to help underwater
borrowers avoid foreclosure.
– Borrower doesn’t need to be delinquent on their mortgage
payments
– Secondary lien cap of $6,000
Refinancing Opportunities
• HR 3522 – Responsible Homeowner Refinancing Act
– Refinancing opportunities for underwater borrowers to allow them
to start rebuilding equity.
• Allows responsible borrowers to take advantage of lower
interest rates.
• Lowers monthly mortgage payment or offers a shorter loan
term .
• Eliminates current Fannie and Freddie special condo risk
fee charge.
State Affairs - Trends
State Affairs - Trends
• 2012
– Delinquent Assessments, Foreclosures, Liens, etc…
– Freedom of Speech
– Transfer Fee
– Manager Licensing
• 2013 What to Expect
Collections, Delinquent Assessments and
Foreclosures
2011 and 2012 Bills
• California – SB 561 – Delinquent Assessments
• California AB 2273 – Foreclosure Notification
• Florida – HB 213/1149 and SB 1890 – Foreclosure
Proceeding Bills
• Hawaii – HB 1600 – Foreclosures
• North Carolina – HB 165 – Delinquent Assessments
• Texas - HB 1228, SB 101, HB 2761 – Foreclosures
• Texas - HB 1228 – Collections
Collections, Delinquent Assessments and
Foreclosures
2011 and 2012 Bills
• Virginia – HB 377 Information Requested by Lender
• Virginia – HB 410 – Recovery of costs for Non Payment
of Assessments
2012 State Legislative Trends
• Foreclosure Notification
– California AB 2273 – Foreclosure notification.
Collaboration between CAI- California LAC and
Conference of County Bar Associations.
• Foreclosing parties must record a sale within 30 days of the
sale and greatly shortens the time for foreclosing parties
to notify associations that they are the new owner.
– Florida – Mortgage Foreclosure Proceedings bills;
gives associations additional rights and expedited
process for abandoned properties.
2012 State Legislative Trends
• Freedom of Speech
– Virginia HB 1008 provides that no provision of the declaration
or rules or regulations adopted shall prohibit an owner or any
person entitled to occupy a unit or lot from exercising his
constitutionally protected right of freedom of speech upon the
unit owner’s exclusive property. The bill further provides that
any provision of a declaration that prohibits the exercise of
such right upon such property shall be void as against public
policy. VA LAC opposed it and offered to work with the
sponsor to address the underlying issues from which the bill
stems. The was carried over to the 2013 session of the General
Assembly—VA LAC will continue to monitor the bill and is
prepared to oppose the bill unless it is amended significantly.
2012 State Legislative Trends
• Freedom of Speech
– Minnesota HF 1254 and SF 926 would have drastically reduce
an association’s authority over property in a common interest
community. Subject to minimal restrictions, owners and
tenants would have a statutory right to display political signs
on property and install flagpoles to any portion of the
property of which the owners have exclusive use, including
balconies and garage stalls. This would have severely
diminished an association’s ability to enforce the association’s
governing documents. CAI grassroots efforts led to defeating
the bill due to lack of hearing.
2012 State Legislative Trends
• Transfer Fees - all passed bills which sought to
further prohibit deed-based transfer fees, while
excluding community associations fees.
– Alaska
– Kentucky
– Rhode Island
– South Carolina
– Wyoming
States that have Enacted Deed-Based
Transfer Fee Bans
States that have enacted bills or statutes that prohibit the establishment or enforcement of
deed-based transfer fees:
AL, AR, AZ, CO, FL, HI, IA, ID, IL, IN, KS, KY, LA, MD, MI, MN, MO, MT, NC, NE, NY, ND, NV,
OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, WA, WY
States that have not legislatively addressed the issue of deed-based transfer fees in their
jurisdiction:
AK, CA, CT, DE, GA, MA, ME, MS, NH, NJ, NM, VT, WI, WV
2012 State Legislative Trends
• Manager Licensing
– Connecticut passed HB 5536. Community association
managers must complete a nationally recognized course on
management and pass the CMCA or similar test.
– Washington State passed SB 6325, which exempted Common
Interest Community Managers from having to become
licensed real estate brokers.
– New Jersey AB 2658, passed in the House and moved to the
Senate.
– Maryland, New York, North Carolina and South Carolina bills
all failed upon adjournment. d due to fiscal notes.
2012 State Legislative Trends
• Interesting Cases Making the News
– Maryland – Pit bull Legislation
• A recent court case in Maryland, Tracey v. Solesky, ruled
that property owners who know, or have reason to know,
of the presence of a pit bull on their property are liable for
injuries caused by such dogs, whether or not they know a
particular dog has a history of vicious propensities.
• According to dogsbite.org, 650 cities and 41 states in the
U.S. have breed specific laws.
2012 State Legislative Trends
• Interesting Cases Making the News
– Illinois – Assessment Collection Case
• The three-judge panel ruled that associations are dutybound to repair and maintain the common elements and
that neglect can be viable defense…"Just as the contract
principle of mutually exchanged promises can justify a
tenant's refusal to pay rent, so that principle can justify a
condominium unit owner's refusal to pay assessments.“
• “…until either a higher court or state lawmakers decide
otherwise, it is binding law…”
2012 State Legislative Trends
• Manager Licensing
– Connecticut passed HB 5536. Community association
managers must complete a nationally recognized course on
management and pass the CMCA or similar test.
– Washington State passed SB 6325, which exempted Common
Interest Community Managers from having to become
licensed real estate brokers.
– New Jersey AB 2658, passed in the House and moved to the
Senate.
– Maryland, New York, North Carolina and South Carolina bills
all failed upon adjournment.
2013 State Legislative Trends
• Manager Licensing
– Regulatory Watch
• Connecticut
• Illinois
• Virginia
– Legislative Watch
– Arizona, Maryland, New York, North Carolina and
South Carolina.
Professional Community Association
Manager Regulations
2013 State Legislative Trends
• Uniform Common Interest Ownership Acts/
Property Ownership Acts
– New and strengthening.
• Transfer Fee Bans
– will not be as popular since so many states have
enacted the language, but still a few remain.
• Ombudsman Acts
– states will continue look into ways to resolve HOA
complaints, but this does not seem to be the answer.
2013 State Legislative Trends
• Mortgage Foreclosure, Lender, Collection of Non
Payment of Assessment
2013 State Legislative Trends
• Unauthorized Practice of Law (UPL)
– Based on Arizona and Florida.
• Uniform Common Interest Ownership Acts/
Property Ownership Acts
– New and strengthening.
Dawn M. Bauman, CAE
Senior Vice President, Government & Public Affairs
Community Associations Institute (CAI)
dbauman@caionline.org
(703) 970-9224