Hoa under master insurance policies with multiple HOAs causing my refinancing loan to be denied

schoy310

New Member
Jurisdiction
California
So here is my issue. I was trying to refinance my condo. B of A is denying my loan due to the fact my HOA has a master insurance plan with includes multiple other projects and so this is a liability and the lender will not approve the project.

My questions:

1) Is this legal for my HOA to do? I suspect they are trying to save money.
2) Is there any reason to sue my HOA due to loss of the loan since this is their fault?
3) Can I request the HOA pay my appraisal fee since the denial is due to their insurance policy?

Thanks.
 
Is it a singular HOA for the multiple properties with common ownership/development? Did those multiple properties exist under this singular HOA when you got the original mortgage? Was that original mortgage from BofA? What year was the original mortgage taken (since mortgage rules have tightened up it is possible there is a change in underwriting on what common insurance is required that is different now than it was then)? When did the HOA change from multiple insurance plans to a master insurance plan or have they always been on a master insurance plan and you just didn't know it?

Have you asked BofA if there was insurance you could personally buy that would make a difference to the underwriter to cover the extra?

I would suspect there were board meetings where this was discussed if it was changed. Possibly even an annual meeting -- did you happen to attend those and voice your disagreement then? HOAs are non-profits and if they save money, you save money as they don't raise your dues or charge you for upkeep/upgrades that are in that budget.

Have you discussed the issue with the HOA to see if they have had feedback from other owners that have tried to refinance?

I honestly see this more as a bank underwriting issue than an HOA issue. It could also happen in a singular insurance coverage plan if the coverage didn't meet the requirements of underwriting.
 
Hi. Thanks for the reply. So apparently I was told that it is not a singular HOA for multiple properties with common ownership/development. It is multiple other projects (not related to my HOA) pooled under one master insurance policy. I don't know the answer to the second question, but would probably have to find out. My original mortgage was with B of A and that was approved without issue in 2009. I would have to find the out the answer to your 5th question.

B of A does not allow us to buy our own extra because it has to be "HOA" insurance, already asked.

I have only recently tried to refinance, so just found out about this. Have not voiced my disagreement yet as still trying to work it out with the HOA. I just wanted to see what my options were in case it went badly. Of course I do not want it to go that way. They have said other owners have not had issues (including with B of A), but when my finance person looked it up, only one was from B of A in our building and they had withdrawn their application.

But sounds like I may just have to go with a different lender/broker that will accept the current HOA insurance plan. I have requested a copy of our updated bylaws also to see if it would help answer any of my questions.
 
So apparently I was told that it is not a singular HOA for multiple properties with common ownership/development. It is multiple other projects (not related to my HOA) pooled under one master insurance policy.

What multiple other projects?

I can't imagine an insurance company going along with that unless the HOA entity itself had insurable interest in those projects. And if it did then the projects wouldn't be unrelated.

You might have to resign yourself to finding another lender because you can bet that the board isn't going to change anything just for you and if you wanted to litigate the issue it would cost you so much money that the cost would more than offset any advantage that a refi might have.
 
Don't know. But the HOA insurance company verified they were not related to our HOA. Apparently, I was told by the bank, it's not done often, but it is a way for them to keep costs down.

It sounds like I will have to find another lender/broker or just keep my current mortgage. I appreciate the input though. Thank you very much.
 
Is this legal for my HOA to do?

What you're asking is whether it's legal for your HOA to "ha[ve] a master insurance plan with includes multiple other projects." While I can't say that I know for sure what a "master insurance plan" is or what it might mean for that plan to "include[] multiple other projects," I can't imagine why that wouldn't be legal.

Is there any reason to sue my HOA due to loss of the loan since this is their fault?

"Their fault"? You mean the HOA's fault? It seems to me that your "loss of the loan" was the bank's decision, not the HOA's decision. In any event, the answer to the question is no.

Can I request the HOA pay my appraisal fee since the denial is due to their insurance policy?

Yes. You can request anything from anyone, and I am certain that your HOA will reject such a request.
 
I can't say that I know for sure what a "master insurance plan" is

FYI, a condo association's "master" policy is a commercial insurance policy containing, at least, property and liability insurance. The property section covers common elements of the complex as well as structural elements shared by the residents, like roof, elevator, basement, courtyards, walkways, parking structures, fences, walls, recreational facilities and, generally, the structural elements of the parts of the condo units that are defined by the CC&Rs as common elements, i.e: bare walls, floors, and ceilings. The liability sections is in case the HOA entity is named in a lawsuit involving injury to somebody in the common areas (among other things).

I'm still waiting to see what the "multiple other projects" consist of.

From an insurance underwriting standpoint the HOA entity would have to have an insurable interest in a "project" for an insurance company to allow it to be added to the association master policy.

One of the board members, for example, would not be allowed by the insurance company to add his auto repair shop to the HOA policy.

A "project" for which the HOA entity has an insurable interest isn't likely to be "unrelated" to the HOA. A lender might not like the way the policy is written but that certainly puts no liability on the HOA for the disqualification of the borrower. It just means that the borrower has to find another lender with whom he/she can qualify or give up the idea of refinancing.
 
Their B of A's project manager was the ones who reviewed the HOA's master insurance policy and it is apparently part of a "pooled master insurance policy". They have shown her where to look on the copy of the HOA insurance. This includes a number of other multiple projects under the same master insurance policy. The B of A person spoke with the insurance person. I did not speak to them myself. the HOA person has messaged the insurance person also, but he has not yet replied.
 
Well, for whatever reason, B of A won't approve the loan because of that unfortunately. They see it as a high risk and will not lend because of it and there's not much I can do about it for now.
 
Well, for whatever reason, B of A won't approve the loan because of that unfortunately. They see it as a high risk and will not lend because of it and there's not much I can do about it for now.


Lenders deny worthy loan applicants everyday, because one can choose how one loans the money possessed.

Frankly, from what I read being denied a loan by B of A might be a blessing in disguise.

The good news is that under capitalism there are lenders ready to loan you what you require. All you need to do is find those lenders.
 
Yes, you are actually right about that. After thinking about it more, we may just not try to refinance again at this time. We didn't actually ask to refinance. We went into the bank for something else and they talked us into it. They got us all worked up for nothing. Thanks for keeping it in perspective. I do appreciate the input from everyone. If anything, it just helps to be more informed in case we ever try again.
 
Nothing about that screen shot refers to any projects. It's nothing but a summary of carriers and coverage limits.

Right.

It's a "layered" property policy where no one insurance company wants to take on the entire amount for one reason or another so the risk of loss is divided among several insurance companies.

That has nothing to do with "multiple projects."

It's very common for the insurance industry to do that on large property risks. I can't imagine why B of A would have a problem with it.
 
I recently purchased a property with an HOA. My realtor recommended a couple of local banks who "were familiar with the property". She said quite often other lenders would back out at the last minute.
 
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