Litigation or Pre-litigation Activity

Projects in which the HOA 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 a Homium mortgage loan.

If a underwriter 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 underwriter must apply Homium’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 underwriter 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:

• non-monetary litigation including, but not limited to neighbor disputes or rights of quiet enjoyment;

• litigation for which the insurance carrier has agreed to provide the defense, and the amount is covered by the HOA's insurance;

• the HOA is the plaintiff in the litigation and upon investigation and analysis the underwriter has reasonably determined the matter is minor and will result in an insignificant impact to the financial stability of the project;

• the reasonably anticipated or known damages and legal expenses are not expected to exceed 10% of the project’s funded reserves;

• the HOA 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 if funds are not recovered;

• 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

• the HOA 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 Homium’s criteria for minor litigation unless

• the claim amount is reasonably anticipated or known,

• the insurance carrier has agreed to provide the defense, and

• the reasonably anticipated or known damages are covered by the HOA’s insurance.

Construction defect litigation in which the HOA is the plaintiff are not considered a minor matter unless the HOA 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 if the funds are not recovered.

The underwriter must obtain documentation to support its analysis that the litigation meets Homium criteria for minor litigation as described above.