HUD/FHA-Insured Financing Receives Clearance


Although the issue of reverse mortgages has been a source of much concern throughout the community, the Recreation Centers of Sun City Inc, is pleased to announce that patience, perseverance and persistence had paid off! From first letter sent to the U.S. Department of Housing and Urban Development (HUD) back in January 2017, RCSC has claimed that RCSC’s Preservation & Improvement Fee (PIF) was an Excepted Transfer Fee Covenant based on 12 CFR 1228, therefore removing any free assumability issues previously reported with FHA insured mortgages which includes reverse mortgages.

On October 5, 2018, RCSC was sent a letter from HUD in Washington DC that states: “FHA in conjunction with HUD’S Office of General Counsel reviewed the documents you provided and found that; to the extent RCSC is a 501(c)(4), which would qualify it as a covered association, such fee appears to meet the definition of an Excepted Transfer Fee under FHFA’s regulations. This finding is based upon the current use of the PIF as outlined in the board resolution as reviewed and may not hold true should such use be modified in the future. Accordingly, the existence of this private transfer fee covenant, as described in the Recreation Centers of Sun City, Inc. corporate bylaws, as amended June 30, 2016 and the Board Policy Resolution No. 24, ‘Preservation and Improvement Fee/Fund,’ would not render a property ineligible for FHA insurance.”

Reverse mortgages, a financial resource available to seniors who have equity in their home and are secured as a supplemental income, are available through FHA-approved lenders. The issues surrounding the free assumability clause had prevented approvals on single-family homes, prompting several area age-restricted communities to change their corporate documents in the hopes of gaining FHA clearance which proved unsuccessful.

As has been published previously, condominiums have separate regulations as pointed out in the letter as well, which states: “FHA also notes that if the property securing the FHA insured mortgage is part of a Condominium Project, that Condominium Project must be approved in accordance with FHA’s Condominium Project Approval and Processing Guide as amended.”

Although the RCSC Board of Directors has been repeatedly criticized for staying on path to this resolve, in the end it has provided the very best results for Sun City AZ. RCSC Assistant General Manager Chris Herring championed this process and did a superb job. RCSC would also like to thank U.S. Representative Debbie Lesko and her team for helping to get this resolution out of Washington DC.

Attachment: Copy of letter received from U. S. Department of Housing and Urban Development, October 5, 2018