As a quick follow up to my post on June 28, 2011, regarding embezzlement and fidelity insurance, this complaint underscores the importance of fidelity coverage even more. Even if you never have an issue with misuse of funds or embezzlement, a lack of fidelity coverage could affect the ability of owners to buy and sell units within your association.
FHA, Fannie Mae and Freddie Mac all require that condominium associations carry some level of fidelity insurance, even if the association has professional management which handles the day to day aspects of collecting assessments. Even a conventional loan with 20% down is likely to be sold by an initial lender on the secondary lending market and thus the loan must meet Fannie Mae and Freddie Mac standards.
While Wells Fargo didn’t exhibit best practices in the situation described in the link above, it’s always the best practice for an HOA to carry fidelity insurance coverage.