As many condominium associations across the nation have come to realize, seeking FHA certification is not an easy task.  The amount of information required by the FHA can be staggering.  Add to this the cost of obtaining certification, and the ongoing issues with varying interpretations of FHA requirements, it’s no wonder many associations have decided to forego obtaining certification.  However, a critical component of the resale market is the availability of FHA financing; therefore, the failure to seek FHA certification causes problems in and of itself.

Recently, the Ohio Civil Rights Commission filed suit against an association for failing to obtain FHA certification based upon a claim of discrimination.  In the case filed, a single mother with one child attempted to purchase a condominium in a community using FHA financing.  The community, however, apparently made an informed decision not to seek FHA recertification after its initial certification expired.  Since the community was not certified, the loan failed and the Commission filed suit.

While there are undoubtedly facts specific to this case, it appears that the failure to seek certification gave rise to a claim that the lack of certification had an impact in a discriminatory manner on this person due to the fact she had a child.  While this case is still very early in the process, we will see to what extent an association’s decision not to seek FHA certification may expose the association to liability. If this trend catches on nationwide, associations will have no option but to make good faith efforts to seek certification, regardless of cost, hardship or perceived benefit to the community.  This may be a very large area of exposure for condominium associations.  As a result, the decision of a condominium association, made in good faith and for good cause, may no longer be an option.

David A. Firmin
2 responses to “To Certify or Not? That May No Longer Be the Question
  1. Find someone who knows what they’re doing and use that expertise. Our company has done applications for our HOA clients as well as non-clients; and yes, gathering the information is time-consuming and the amount of documentation can be daunting. But you can find people/companies who will work with you to obtain the initial documentation and any additional information HUD may request to give your community the best shot at certification – and the cost can be very reasonable.
  2. Doesn’t FHA allow for spot certification by an individual owner or buyer? I fail to see any discrimination in this case, because failure to certify affects everyone equally, not just those with children. And there are other complexes. If this buyer really wants an FHA loan, she could look in communities that have certified. Any way, it wasn’t the HOA or the board that allegedly discriminated, it was FHA itself. Maybe someone should look at it from that standpoint. I assume CAI will be filing a brief in this case.

    What is considered a “reasonable” cost? Many HOAs are operating on an extremely-tight budget, and any added expense must be passed onto the entire membership by way of an assessment increase. Either that, or use funds from reserves, as one HOA I managed had to do. I consider it deplorable that the FHA has put association’s in this position. If anything, FHA is singling out associations in this instance, because it does not have the same requirements for single-family homes.

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