Reverse mortgages and FHA approval for seniors
Q. We are senior citizens who own a condominium with no mortgage. We want to stay in our condominium, however, our savings are dwindling, and our fixed income is not keeping up with our expenses. One of our friends said we should consider a reverse mortgage. I talked to the board of my condominium association and learned that the association is not FHA approved. What would that involve?
A. The U.S. Department of Housing and Urban Development has a website ( HUD FHA Reverse Mortgage for Seniors (HECM) | HUD.gov / U.S. Department of Housing and Urban Development (HUD) ) that addresses reverse mortgages for seniors.
It notes that “(r) everse mortgages are increasing in popularity with seniors who have equity in their homes and want to remain in their homes or supplement their income. The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM), and is only available through a Federal Housing Administration (FHA)-approved lender. The HECM is the FHA's reverse mortgage program that enables you to withdraw a portion of your home's equity to use for home maintenance, repairs, or general living expenses. HECM borrowers may reside in their homes indefinitely as long as property taxes and homeowner's insurance are kept current.”
FHA insures reverse mortgages on condominiums that meet certain FHA requirements. A condominium project must apply to HUD and be granted approval before a buyer can purchase a unit with an FHA loan or before an existing resident can refinance into an FHA loan such as a reverse mortgage. In order for a condominium project to become FHA approved, there is a variety of criteria that the association will have to abide by to qualify.
It is possible that your association has not obtained FHA approval because it would not qualify under the current criteria. The association should review the criteria with counsel or other available resources to help guide the way. That said, a borrower might be able to obtain an FHA Single-Unit Approval, if the condominium association is not FHA approved.
Q. Our association is considering an amendment to the declaration to establish certain restrictions on the type of vehicles that can be parked in common area driveways and other parking areas of the association. Owners are generally in favor of the ideas being floated; however, a question came up whether the changes can be effective on a future date, rather than immediately when the amendment is recorded. Can this be done?
A. An amendment of the declaration or by-laws is generally deemed effective upon recording in the office of the recorder of the county wherein the property is located, unless the amendment sets forth a different future effective date. Therefore, the amendment could expressly state a future date upon which it will become effective. For example, the amendment could state that it is effective in some specified number of days after the date of recording, or it could state a specific future date upon which it is effective. Either approach would be acceptable.
Q. I live in a condominium association. The board adopted a rule permitting owners to consent to receive notice electronically, and to conduct business by acceptable technological means. I did not consent to this, as I do not have a computer. The board has advised me that I will be charged to receive notice by regular mail. Can the association charge me to receive notices by regular mail?
A. No, the association cannot charge you to receive notices by regular mail. The mailing to you, or to any other owner who did not consent to receive electronic notices, would be at the association’s expense. Section 18.8(f) of the Illinois Condominium Property Act governs this and provides that “i f any person does not provide written authorization to conduct business using acceptable technological means, the association shall, at its expense, conduct business with the person without the use of acceptable technological means.”
• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.