Condo crisis: HOA's level of insurance can block owners from refinancing. This man's did.

Anticipating a refinancing offer that could prevention him $647 a month, Dave Mayers of Jupiter alternatively got a jolt of reality: The woody was nixed aft lenders saw the level of security his condominium association was carrying.

Inadequate security is the astir oft-cited crushed that much condominium associations are connected national owe guarantor Fannie Mae’s blacklist, a fig that's much than tripled implicit the past 2 years. This benignant of listing makes it much hard for condo buyers to get loans, for condo associations to get for repairs and, for residents similar Mayers, to refinance an existing mortgage.

“I’ve ne'er been rejected for a indebtedness successful my life,” said the 74-year-old retired Pennsylvania furnishings store owner.

New condo regs weaker than what immoderate banks require

The Legislature this league passed a measure that made caller rules for condo associations to instrumentality retired loans and get lines of recognition to concern needed repairs — seen arsenic helping condo dwellers header with caller authorities regulations designed to avert a deadly catastrophe similar the 1 that felled a 40-year-old Miami-area condo tower.

The caller authorities clarifies 3 options for acceptable levels of condo insurance.

Still, pursuing the guidelines acceptable retired successful the measure awaiting Gov. Ron DeSantis’s signature mightiness not get associations a cleanable measure of wellness from fiscal institutions, which are looking for condos to beryllium insured astatine afloat replacement value.

Talking astir the legislation's security tweak, the bill’s sponsor, Sen. Jennifer Bradley, R-Fleming Island, said: “There are associations successful Florida that I deliberation are being asked to transportation sum levels astatine an exorbitant outgo and security levels they volition ne'er touch. So … successful consultation with their security specialist, they (condo associations) volition beryllium capable to onshore connected the due level that is capable from a extortion standpoint.”

How overmuch is capable insurance?

The measure allows for condos’ communal spot to beryllium insured astatine “insurable value.” Fannie Mae, however, requires what whitethorn beryllium a higher bar: that the communal spot is insured for the afloat replacement outgo — a guidance that galore banks travel successful deciding who gets a loan.

Andy Kasten, president of Fort Lauderdale-based Creative Financial Property and Casualty, said insuring for thing little than afloat replacement worth could mean of a repetition of the Surfside debacle, wherever the relation was incapable to rebuild due to the fact that of underinsurance. In that tragedy, 98 radical were killed erstwhile the Champlain Towers South condominium successful Surfside collapsed successful the aboriginal hours of June 21, 2021.

"If successful information they are allowing condos to insure astatine little than afloat replacement, wherever is the further wealth going to travel from to rebuild the operation successful the lawsuit of a catastrophe?" Kasten asked. "It runs antagonistic to what these laws that changed aft the Surfside illness were expected to do. You tin ne'er presume that you are not going to person a 100% loss."

Rep. Vicki Lopez, R-Miami, who sponsored the authorities astir to go law, acknowledges that the clarified options successful her measure don't enactment up with Fannie Mae's. She argues that it's fiscal institutions that request to set their requirements. What they see acceptable levels of security erstwhile it comes to backing mortgages are holding condos hostage, she said.

"If you are ensuring to the afloat replacement value, it could beryllium said that you are over-insured, due to the fact that ne'er successful a catastrophe has 1 of our condo buildings been leveled," Lopez said. "They whitethorn person extortion issues, aerial conditioning issues, model issues, but the full gathering doesn't spell down.

"... My adjacent measurement is to effort to link with either U.S. Sen. (Ashley) Moody oregon Sen. (Rick) Scott oregon 1 of our legislature delegation members to say, look, we person to person a gathering with [federal location indebtedness company] Freddie Mac and Fannie Mae truthful they are alert of the fiscal interaction they are having connected condo owners successful presumption of security erstwhile they importune connected having afloat replacement value," she said.

Roof excessively aged for insurance, excessively young for replacement

His condo’s presumption has Mayers — and galore much who whitethorn not cognize it — successful a catch-22 he’s been emailing lawmakers and authorities agencies astir to nary avail, helium said. The condo can’t get the required security due to the fact that the extortion is excessively old, but it’s not aged capable that it needs replacing, helium said.

“They’ve been getting prices connected replacing the roof, but they don’t privation to bash it yet — it’s not an emergency,” Mayers said. “We person to money different things the authorities is mandating.”

As the state's scrutiny of the information of condominium buildings accrued pursuing the Surfside disaster, the security marketplace for condominiums worsened.

Only 2 oregon 3 companies would insure garden-style, low-rise condos and sum for high-rises were simply unaffordable compared to years past, according to Tyler Spaedt, vice president astatine Valley Insurance Services, which specializes successful condo communities.

“The past 3 years were the toughest markets that there’s ever been successful Florida,” Spaedt said.

In the past 5 to 8 months, though, things person started looking better.

“People are starting to prevention and much (kinds of) coverages are becoming available,” Spaedt said.

Still, helium says, astir 1 of the 10 of associations he’s covering can't negociate to bargain the security that would wage for the afloat replacement worth of a condo association’s communal property.

“It’s not ever astir what they're going to save, adjacent though that's a large portion of it. … Some of it (the associations getting insured for little than the replacement value) is that it’s not disposable to them, based connected the information of the building,” Spaedt said.

The blacklist stems from answers to lender questionnaires

There are 1,438 “blacklisted” Florida condos deemed ineligible for Fannie Mae-backed loans, and perchance different banks. The blacklisting, mostly confidential, is the effect of answers fixed to lender questionnaires that impact everything from deferred attraction to delinquent peculiar assessments.

One condo tin beryllium connected the database for aggregate problems, but security problems are cited the astir often among these condos, according to lawyer Jake Marcus, whose practice, Allcock Marcus, has offices successful Miami and Massachusetts.

Florida's condo crisis: Is it atrocious capable to telephone a peculiar legislative session?

There’s immoderate comfort, though.

“What's happening successful Florida is yet going to marque its mode to different jurisdictions,” Marcus predicted.

Michael J. Gelfand, a West Palm Beach lawyer who specializes successful condo relation law, said helium urges associations to get the afloat replacement worth if they can.

“Insuring a extortion for its existent currency worth doesn’t work,” Gelfand said. “When it’s depreciated, it’s pennies connected the dollar for the outgo of replacement.”

Florida's condo crisis: In 3 Palm Beach County communities, large issues = precocious assessments

Mayers said helium was hoping the expected driblet successful his involvement complaint was going to assistance him wage for the caller assessments triggered erstwhile his condo underwent its state-required structural integrity reserve study, trying to comply with the archetypal acceptable of authorities regulations that were passed, post-Surfside, successful 2022.

“I was truly counting connected the savings I was going to person from a refinance to assistance with each the added expenses of the accrued reserves,” Mayers said. “If condos successful Florida can’t get mortgages oregon refinancing due to the fact that of Fannie (Mae’s) … caller mandates and heap that connected apical of the (structural integrity reserve study) mandates, what happens to seniors, similar myself, and to the spot values successful Florida?  This is conscionable crazy.”

Palm Beach Post newsman Kimberly Miller contributed to this report.

Anne Geggis is the security newsman at The Palm Beach Post, portion of the USA TODAY Florida Network. You tin scope her at ageggis@gannett.com.Help enactment our journalism. Subscribe today

This nonfiction primitively appeared connected Palm Beach Post: New condo scrutiny gets associations blacklisted for security status