Can't get a loan because the association has litigation!

I have always known that if a condo association or other such groups was being sued, when the condo questionnaire was sent to the management company and the question 'Is there any pending litigation' and they answered YES, that stopped the loan right there. So this week I have found two different litigation in progress to which I think it is absurd that the lender will not read and consider a very logical explanation, prepared by the associations attorney.

One is: A homeowner is suing the association for the right to have a dog, when it is clear that the CC&R's, rules & regs prohibit such. This is not a pet for health reason, he just wants a dog. So, because of this, the lender has turned down the loan which otherwise is 100% approved.

The second: The association is suing the insurance company for failure to pay a claim. The insurance company denied the claim almost 2 years ago. So the association went ahead and paid for the work to be done to the common areas because of water damage. The work has been completed. The association has sufficient funds to support the lawsuit in operating account. The Board of Directors and homeowners have approved the action to move forward. The lawsuit has been in play for over a year and there have been sales and re-finances done. All of a sudden this week, a loan was 100% approved and then again, this questionnaire came from the management company stating there is a pending lawsuit.

In this case the suit is not against the association rather the association is suing another company!! And the lending guidelines are preventing the lender from finalizing and funding.

Any recommendations on how to handle these situations? To get the loan approved when the litigation is clearly disclosed and has little or no impact on the overall association. HELP.... Suggestions appreciated.

Ken Cash, Coldwell Banker Incline Village Real Estate Lake Tahoe, Nevada