FHA Condo Processing Guide
The FHA officially issued its Condominium Project Approval and Processing Guide on June 30, 2011. The purpose of this guide is to combine all prior guidance, which had been issued piecemeal, into a single, comprehensive document.
This guide reiterates that, as long as an association has at least 10% of its assessments directed to the reserve fund, it will meet the reserve study qualification; a formal study is not required.
Unfortunately, this is typical of FHA rules; as it potentially penalizes associations that have consistently "done it right," and rewards those that didn't. How do we say this? 10% as a reserve assessment may be far too low, or far too high; only by performing a reserve study can you know the answer to that question.
But, the rules are slanted by essentially saying "It's OK that you never set any reserve money aside in the past, and that you're woefully underfunded at the present time, as long as you put 10% of your assessments into reserves, you're OK. That's the reward to an association for doing it wrong.
Contrast that to an association that has always funded reserves, is fully funded, so directs less than 10% of their assessments to reserves at the present time. This association is in an infinitely better financial position than the association described above, yet FHA will give it lower marks because it is funding less than 10%.
Contact Facilities Advisors, Inc. for a reserve study quote and let us prepare your reserve study. See our RFP (Request For Proposal) form here.
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