Collateral for Association Loans:
- Assignment of assessment income
- UCC-1 filing on all business assets of the association and operating and reserve accounts of the community
- No personal guarantee
- No mortgage interest taken in any unit owner’s property
- No restrictions on resale or refinance of an owner’s property
Underwriting considerations
- Delinquency
- Maximum of 10% of units can be aged 60 days past due
- Under 6% is considered good
- Under 4% is considered excellent
- Aggregate Cash Balances
- Minimum of 20% of annual regular assessments
- Over 50% is considered good
- Over 100% is considered excellent
- Aggregate annual assessments as a percentage of unit value
- Liability per unit as a percentage of unit value
- Unit owner concentration
- If any-one owner controls more than 10% of the units, additional due diligence on that owner may be necessary
- Future reserve expenses and planning
- Community size
- Community support for the project
- Ideally, a homeowner vote (even if not required) is preferable to Board approval only, especially when assessments will be increasing significantly
- If Board approval only, documented communications to the homeowners should be provided