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Are Condominium & HOA Bank Deposits Fully Insured By Uncle Sam?

Condominiums and homeowners associations (HOAs) currently have an estimated $50 billion on deposit nationwide in banks to stash operating account and reserve funds, experts say.

Is it possible that hundreds of millions of dollars on deposit by the estimated 50,000 condo associations and HOAs in Illinois could be at risk if these accounts are not protected by Uncle Sam—the Federal Deposit Insurance Corp.(FDIC)?

“My homeowners association bank accounts are titled in the name of the management company and my HOA,” noted John Sellers, a banker, consumer advocate and HOA resident. “I can’t figure out if the management company is commingling the money with other accounts. If my HOA board directors are not signers on the bank account, is the money really ours?”

A concerned homeowner recently wrote to the FDIC and asked for clarification: “Management companies hold huge assets from many, many HOAs with some accounts exceeding $1 million. If something happened to the management company that caused my HOA to lose our financial assets would FDIC insurance step in and reimburse the HOA up to the limit of $250,000? Or would the FDIC reimburse the management company?”

In reply, was the following FDIC memorandum: “The FDIC only protects depositors of insured banks located in the United States against loss of their deposits if an FDIC-insured depository institution (IDI) fails.

“The FDIC would not be involved in the event something happened to the management company for your homeowners association (HOA) that caused your HOA to lose its financial assets. The FDIC insures deposits owned by a homeowners’ association at one insured bank up to $250,000 in total, not $250,000 for each member of the association.”

The FDIC told the homeowner that it is possible his management company may be acting as an agent for multiple HOAs, with the funds of the HOAs commingled in one account at a bank. The management company would be holding the funds in a fiduciary capacity for the HOAs at the bank.

“If the management company is complying with the FDIC’s rules for pass-through deposit insurance coverage, then each HOA the company is holding funds for in the commingled account would have up to $250,000 of deposit insurance coverage at that bank,” explained the FDIC memorandum.

A management company holding funds as an agent on behalf of multiple HOAs would be another example of a fiduciary relationship, the FDIC said. And, the fiduciary nature of the account must be disclosed in the bank’s deposit account records. For example, listing “Jane Doe as Custodian for Susie Doe,” or “First Real Estate Title Company, Client Escrow Account”.

“The name and ownership interest of each homeowner must be ascertainable from the deposit account records of the insured bank or from records maintained by the agent (or by some person or entity that has agreed to maintain records for the agent),” the FDIC memorandum said. Visit:

Armed with a clear FDIC directive, Sellers noted that banks holding HOA deposits must be clearly identified in the documentation.

“Banks have confirmed that the FDIC also tracks deposits with tax identification numbers,” Sellers said. “In most cases, only the Tax ID of the management company shows on the homeowners association account, rarely the name of the HOA. If these records do not exist, a key FDIC requirement is not satisfied.”

A new national survey by the Coalition for Community Housing Policy in the Public Interest (CHPPI), has found that 60.9% of the more than 500 survey respondents urged that community associations should have more government oversight and regulation.

Some 49.9% of respondents reported that they were “very dissatisfied” with HOA and condo living, and 21% said they are “somewhat dissatisfied.” Fully 65.7% are “very dissatisfied” and 15% are “dissatisfied” because of transparency and communication issues.

The on-line, opt-in survey, which rates the level of concern on more than 50 commonly reported topics and issues, generated responses from condo and HOA owners across the nation, including Illinois, Florida, Texas, Arizona, California, Missouri and Kansas. Visit:

“Our 2017 CHPPI survey found that a broad spectrum—from financial transparency, voting and election procedures, to the power of the board to fine owners—were viewed as major problems by respondents,” said Sara E. Benson, a CHPPI advisory member and president of Association Evaluation.

According to the Community Associations Institute (CAI) there currently are more than 337,000 homeowners associations where more than 68 million people reside across the United States. CAI is a trade association and special interest group that primarily represent attorneys and property management companies servicing homeowner associations.

The city of Chicago currently has about 12,235 condo and homeowner associations containing approximately 305,000 residential units, according to a comprehensive directory—the “2016 Association Evaluation Report on Illinois Condominiums and Homeowner Associations.” Association Evaluation, LLC, is a Chicago-based real estate technology firm that rates the livability and stability of condo and homeowner associations. Visit:

For more housing news, visit Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit

“The book is Escaping Condo Jail by Sara Benson and Don DeBat. I would say that anybody thinking about buying a condo, or even anybody serving on a condo board, or anybody who has any connection to a condo, this is must reading—all 600 and something pages. Thanks a lot for a great book!”


Steve Sanders, “Your Money Matters” WGN TV, December 22, 2014

By Don DeBat

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