Refinancing or purchasing a Florida condominium involved in litigation can be challenging, requiring you to take a look beyond conventional Florida mortgage options and find brokers who specialize in non-warrantable condo loans with litigation. Condo loans with litigation are condos that do not meet Fannie Mae’s or Freddie Mac’s requirements. Litigation will be approved on a case-by-case basis. In some cases minor litigation issues are fine but anything that affects. Health safety or habitability is Not allowed
Possible Mortgage Options W Litigation:
- 10% Down Limited Review + Piggyback Second Loan – 75% first mortgage, 15% HELOC, and a 10% D.P
- 10% – 20% Down Non-warrantable condo lenders – Subject to lender’s final approval.
- 25% Down Limited Review – Condos qualify for a minimum down payment of 25%.minimum down payment of 25%.
- 35-50% – Case-by-case private mortgage lender approvals on Florida condos with litigation.
All options are subject to the lender’s final approval. It is always a good idea to get the condo questionnaire, budget, and a copy of the litigation first before we order the appraisal to make sure the condo meets the lender’s specifications.
- Factors Condo Mortgage Lenders Consider: Lenders will assess the specific issues with the building, the financial status of the condo/HOA board, and the borrower’s creditworthiness.
- Challenges with Conventional Financing: Condominiums with pending litigation, especially concerning habitability, safety, structural soundness, or functional use, may not be “warrantable” for conventional, conforming loans.
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Private Mortgage Lenders: You’ll need to seek brokers who work with non-bank, unconventional, and “portfolio lenders” willing to take on the risk of non-warrantable condo loans.
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Documentation Required: You’ll likely need a completed condo questionnaire from the condo board, a copy of the COA’s budget, a list of condominium fees, and proof of COA insurance.
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Florida Statute 718.1255: This statute requires pre-suit mediation or arbitration for certain disputes in condominium settings, which can be an alternative to litigation.
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Legal Action Against HOAs: Homeowners may have grounds for legal action against their HOA if they believe the association is unfairly hindering sales or engaging in actions that impair property values.
Litigation or Pre-litigation Activity
Projects in which the HOA or co-op corporation is named as a party to pending litigation, or for which the project sponsor or developer is named as a party to pending litigation that relates to the safety, structural soundness, habitability, or functional use of the project are ineligible for sale to Fannie Mae.
If a lender discovers that a project is engaging in pre-litigation activities (such as, but not limited to, arbitration or mediation) that are reasonably expected to proceed to formal litigation; the lender must apply Fannie Mae’s litigation policies. Whether the legal action is resolved through arbitration, mediation, or it proceeds to litigation, there is risk that the project is exposed to material financial hardship related to the matters addressed in the complaint.
If the lender determines that pending litigation involves minor matters with no impact on the safety, structural soundness, habitability, or functional use of the project, the project is eligible provided the litigation meets one or more of the following:
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non-monetary litigation including, but not limited to neighbor disputes or rights of quiet enjoyment;
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litigation for which the insurance carrier has agreed to provide the defense, and the amount is covered by the HOA’s or co-op corporation’s insurance;
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the HOA or co-op corporation is the plaintiff in the litigation and upon investigation and analysis the lender has reasonably determined the matter is minor and will result in an insignificant impact to the financial stability of the project;
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the reasonably anticipated or known damages and legal expenses are not expected to exceed 10% of the project’s funded reserves;
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the HOA or co-op corporation is seeking recovery of funds for issues that have already been remediated, repaired, or replaced and there is no anticipated material adverse impact to the HOA or co-op corporation if funds are not recovered;
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litigation concerning localized damage to a unit in the project that does not impact the overall safety, structural soundness, habitability, or functional use of the project; or
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the HOA or co-op corporation is named as the plaintiff in a foreclosure action, or as a plaintiff in an action for past due HOA or co-op assessments.
Litigation that involves personal injury or death does not meet Fannie Mae’s criteria for minor litigation unless
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the claim amount is reasonably anticipated or known,
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the insurance carrier has agreed to provide the defense, and
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the reasonably anticipated or known damages are covered by the HOA’s or co-op corporation’s insurance.
Construction defect litigation in which the HOA or co-op corporation is the plaintiff are not considered a minor matter unless the HOA or co-op corporation is seeking recovery of funds for issues that have already been remediated, repaired, or replaced. In addition, there is no anticipated material adverse impact to the HOA or co-op if the funds are not recovered.
The lender must obtain documentation to support its analysis that the litigation meets Fannie Mae’s criteria for minor litigation as described above.
Condo Litigation Questions And Answers
This is NOT giving you legal advice. Contact your attorney for legal advice.
- Can you get a mortgage with a pending lawsuit? If you are currently involved in a pending civil lawsuit, there is a possibility that you could get a home loan, but it is not likely. The financial responsibilities that come with pending lawsuits are often seen as a risk to mortgage lenders.
- Can a condo unit owner sue the association in Florida? In Florida, residents can initiate legal action against their condo association if they believe the association has been negligent, however, the actual legal theory under which a resident would file a lawsuit is breach of contract and/or breach of a statutory duty.
- Can you refinance a condo in Florida? You can refinance a condo and potentially lower your mortgage interest rate or tap into your home equity.
- Can a condo unit owner sue the association in Florida? In Florida, residents can initiate legal action against their condo association if they believe the association has been negligent, however, the actual legal theory under which a resident would file a lawsuit is breach of contract and/or breach of a statutory duty
- Are there any lenders in Florida that will lend on condos with litigation? Yes
- Florida Condo Lender Approvals With Litigation –
- Mortgage Lenders in Florida that will loan on condos with Litigation?
- Are there any lenders in Florida that will lend on condos with litigation?
- Refinance Florida Condominiums with litigation
