Some associations are facing premiums increases of hundreds of thousands of dollars per year, making it impossible for new buyers to secure mortgage lending. But what can you do about it? In this article, we will explore the impact of rising insurance premiums on California community associations, the consequences of not having insurance, and what steps you can take to address this growing problem.
But what about board members of homeowners associations in Florida and Georgia? While the insurance premium hikes have hit California hard, it’s important to keep in mind that this issue may affect laws and regulations in other states as well. In fact, some experts predict that the insurance industry could face similar issues in the future.
For example, Florida and Georgia are both prone to natural disasters such as hurricanes and flooding, which can increase the risk for property damage and insurance claims. In recent years, insurance companies have responded by raising premiums and tightening underwriting standards to protect themselves from financial losses. As a result, some homeowners associations in these states have also experienced rising insurance costs, though not to the same extent as in California.
In some cases, these increasing premiums are making it impossible for new buyers to secure mortgage lending. This is particularly concerning as it puts these communities in violation of their governing documents and opens up the board to directors and officers liability claims.
Furthermore, Fannie Mae and Freddie Mac, which secure low-cost, conventional loans for mortgages issued by credit unions, banks, and other financial institutions, will not back mortgage loans when an association is in violation of its governing documents, particularly the insurance provisions. This means that if an owner can no longer afford to live in their community because of the increased costs of insurance, they might not be able to find anyone to buy the home, creating a different kind of financial crisis for the community.
According to recent reports, Fannie Mae halted financing for over 6,000 condominiums and single-family homes in Third Laguna Hills Mutual, a 55-and-over community in Laguna Woods Village, Calif. due to a nearly $1 billion insurance coverage gap. This has left many homeowners unable to sell their properties and has created a ripple effect throughout the community.
In California, lawmakers have urged the state to help a growing number of community associations hit by soaring insurance costs. A coalition of lawmakers recently sent a letter to California Insurance Commissioner Ricardo Lara asking him to take action to stabilize the insurance market. They also called for more transparency in the insurance industry and greater regulation to prevent excessive rate hikes.
To prevent these issues from occurring, it’s crucial for HOA boards to prioritize insurance coverage and work with reputable insurance agencies to find affordable and comprehensive coverage. It’s also essential to review governing documents regularly to ensure compliance with insurance provisions.
As a board member of an HOA in Florida or Georgia, it’s important to stay informed about this issue and be proactive in addressing it. It’s likely that any rise in insurance premiums could result in increased fees and special assessments, placing the strain on your homeowners. But don’t worry—your association could have the ability to cut costs by working with Ardent Residential! We believe that the broiler-plate packages that most management companies sell aren’t sufficient to help your community thrive. That’s why we customize our services to each individual client. If you’re worried about rising insurance premiums, it might be time to give us a call and see how your association could save money.
A partnership with Ardent Residential means a hedge of protection for your Association, with Ardent’s Value Guard™ protection plan. Value Guard™ is the only product of its kind, and guarantees against falling property values. CLICK HERE to find out more!
