HOA SCramble to Make Ends Meet BUt Are They Missing an Opportunity?

First thing to add to the list of things you ought to know before you buy is (a) whether the home is part of an Homeowners Association or Condominium or Cooperative association and second whether there are major repairs that are needed or under way because that may mean really big assessments. Once you have purchased the property, YOU are the person responsible  for payment of monthly and special assessments not the former owner and not the title company that issued you a title policy.

Even if you have a contract with the previous owner, unless the association agrees in writing that won’t enforce the special or delinquent assessments against you, they can still foreclose on the property just like a mortgagee can foreclose.

But here is where it  gets interesting. Most of the “good” decisions for borrowers came about as a result of two institutions fighting it out rather than David vs Goliath. They are considered to be on more even footing legally and practically by the person sitting on the bench wearing those black robes.

As I have already stated in numerous TV and radio interviews, the associations stand in a unique position to help correct the housing crisis.

If the Associations foreclose against the homeowner AND they name the originating lender and any assignee as junior lienholders or unsecured lienholders, there is a much better chance that the Judge is going to take a much closer look at the paperwork. Where that has occurred the I am receiving reports the association was successful. That raises the interesting prospect of allowing the homeowner to redeem on the association foreclosure and then have the house free and clear of the pretender lenders.

This same logic applies to  homes foreclosed by pretenders and then  abandoned or at least ill-maintained. The association should foreclose against the “former” homeowner and name the pretender as junior or unsecured. This might just revive a blighted neighborhood.

The fact remains that the Association does have its paperwork in order and the pretender lender never did.

Do Your Homework Before Buying into HOA Communities

by Chad Elliott, http://www.sheltertampa.com/homeowners-associations-foreclosures

Homeowners Associations Under Siege By Foreclosures

Do your homework on the Homeowners Association before Buying.

About one in six Americans currently live in a community run by a condo or homeowners association.  With the recent increase in foreclosures, some homeowners associations are running out of cash.  HOA’s are like miniature governments that depend on revenue to finance upkeep of common areas, community pools, tennis courts and private roads.

Homeowners-Association-ResearchBefore a property goes into foreclosure, many owners stop paying their monthly HOA dues. In fact, HOA fees are generally among the first bills struggling homeowners quit paying.   If they can’t afford their mortgage, then they aren’t going to pay their HOA fees.  Adding to the problem, some banks aren’t paying HOA fees on properties they have foreclosed on and now own.   As a result, association fees rise and the property may be less desirable to buyers.

In the current climate of foreclosures, it’s even more important for potential buyers to read the bylaws; as the bylaws will explain what services are provided and if there is a cap on the annual fees.   Some of the bylaws even include information on how they’ll handle foreclosures and payments of fees.  It’s also important to know how the board is managed.   Boards are typically managed two different ways; by the homeowners themselves, or by an outside company that has been hired by the homeowners association.  In the uncharted waters of foreclosures, a professional management company may be the best bet for a home owners and potential buyers.

Homeowners-Association-Balance-SheetWhen looking at the balance sheet of a homeowners association, a buyer should look at their reserves. Buyers want to make sure there is enough cash on hand to take care of maintenance and other services.  If there is no reserve fund, the association may have to impose special assessments when major projects become necessary.   If HOA’s don’t have reserves, they may be forced to close community amenities like parks, pools and community centers, because they can no longer afford to build and maintain them.

It’s also important for buyers to remember that Associations aren’t corporations.   They operate year to year. They collect in dues what they believe they need to pay for amenities and services that residents expect.  Even though many homeowner associations have the power to foreclosure if dues are in arrears, few have the money or means to do it.

Buyers need to do their due diligence; as it will help them avoid surprises after they move in.   Realtors who specialize in being a Buyer’s agent or who have the Accredited Buyers Representative designation can help guide a buyer to get the documentation they need; as well as they can find out how many foreclosures are in the area.

12 Responses

  1. Good for you Robert. The originator is not the lender and the deed is incorrect. More judges need to get this!

  2. HOA’s are a nightmare…Nazi’s. From the color of your house to trash can placement they can dictate. If they don’t like you, watch you butt. Give an insecure person a little authority and you live in hell. ‘Cause that’s what you have in these associations.

  3. re : the Robert Wade comment. it’s short on specifics and details, and doesn’t make a lot of sense. If the federal judge in fact discharged the debt, then you wouldn’t need to advertise it in the paper or get an affidavit of publication to make it valid. something doesn’t add up here

  4. I’ve been quiet for a while now, but this statement deserves a reply : “This same logic applies to homes foreclosed by pretenders and then abandoned or at least ill-maintained. The association should foreclose against the “former” homeowner and name the pretender as junior or unsecured. This might just revive a blighted neighborhood.”

    Those 40 words demonstrate that the author knows very little about foreclosure and real property law. As a junior lienholder, the HOAs were wiped out when the senior foreclosed. Their debt still existed, but they were no longer secured by the property.

    Shame, shame dear author

  5. oh, and the hoa charge for cute lil mailbox in the community sub div guess whoesmail went missing until last day of the 341 meeting mail was opened and then placed back in the box it had taken 2 weeks to get to me from CA – i rallied like hell did an answer which holds up to this day in fact- ran down to court in my lunch break.

  6. personally i hate HOA, again – do we ever truely own, we are renters and we cant decide what plants or trees we can CHOOSE- but now some things make sense, they tried to collect from me i had paid big fees the whole time i stayed in my home through modification scam through litigation i told them to stop sukking my blood i had paid my hoa fees even after hsbc per se got custody and it states HSBC is the new proud owner on the county TAX record so pppppp pissoff, and they did, well now, we have the developers men sitting there on their board of directors. Neil you know who these guys are. in 3 years i had to learn how the world turns.

  7. http://www.cleveland.com/business/index.ssf/2012/08/thousands_of_ohio_homeowners_w.html#incart_river_default

    Thousands of Ohio homeowners were foreclosed on improperly, lawsuit claims
    Published: Tuesday, August 14, 2012, 6:00 PM Updated: Tuesday, August 14, 2012, 6:43 PM
    Teresa Dixon Murray, The Plain Dealer By Teresa Dixon Murray, The Plain Dealer

    Eight mortgage-related businesses are accused of falsifying documents to improperly foreclose on thousands of homeowners in Ohio.

    The suit alleges that the mortgage service companies altered paperwork to make it appear they had authority to file foreclosures in the proper time frame. A Cleveland law firm, Kaufman & Co., joined five other local and national law firms to file the suit on behalf of seven Ohio homeowners.

    The suit, filed in Cuyahoga Common Pleas Court, seeks class-action status, meaning thousands of homeowners in similar situations could benefit.

    The allegations are significant because they expand on the “robo-signing” controversy involving some of the nation’s largest banks over the past two years.

    A dozen banks this year either settled with regulators or were fined over charges that they rushed foreclosures by submitting falsified documents to courts, often without even reading them.

    Unlike the bank cases, this one involves behind-the-scenes mortgage servicers, processors or law firms that generally handled payments, collection efforts or foreclosure prosecution. Consumers may not know whether they are potentially included in the class; they will be notified by mail or through legal notices in newspapers.

    The defendants are Lender Processing Services of Jacksonville, Fla.; LPS Default Solutions of Jacksonville; DocX LLC of Jacksonville; Fidelity National Information Services of Jacksonville; American Home Mortgage Servicing of Coppell, Texas; and three Cleveland law firms: Lerner, Sampson & Rothfuss; Reimer, Arnovitz, Chernek & Jeffrey Co.; and Manley Deas Kochalski LLC.

    Most of the allegations involve Lender Processing and LPS. Company spokeswoman Michelle Kersch did not respond to a request for comment.

    One of the plaintiffs, Linda Clark of Lakewood, originated her loan with Home Loan Corp./Expanded Mortgage Credit. She later dealt with Bank of New York Mellon and JPMorgan Chase. Other local plaintiffs are Jeff Doehner and Laura and Michael Yeager, all of Geauga County.

    The suit claims the firms committed fraud by preparing, executing and notarizing fraudulent court documents and other records and also violated the Ohio Consumer Sales Practices Act. When a mortgage is sold to another company, the seller must transfer all of the necessary documents within 90 days or else the buyer doesn’t have legal standing to foreclose. The suit claims the defendants fabricated or forged documents to push foreclosures through.

    The suit seeks damages for consumers including the loss of down payments on their homes, loss of money spent on improvements to their homes, equity lost during the sheriff’s sales, legal fees and compensation for damaged credit ratings, which has made it difficult or the homeowners to get another mortgage or rent a house or apartment.

    Consumers who want more information about the case can call attorney Steven Kaufman at 216-912-5500 or by email at steve.kaufman@kaufman-company.com

  8. “This same logic applies to homes foreclosed by pretenders and then abandoned or at least ill-maintained. The association should foreclose against the “former” homeowner and name the pretender as junior or unsecured. This might just revive a blighted neighborhood.”

    Don’t think that can be done. There may only be one action of f/c against a property for debt owed concurrently (like a first and second, including hoa dues/lien). I don’t think an hoa could foreclose against the former homeowner. I can’t remember the priority of hoa liens, which is important, but most if not all liens of a purchaser are second to a purchase money mortgage. (refi is diff, but I don’t know as to how in regard to hoa liens) This provision is found in state law. Something happens to the rights of jr lienholders upon foreclosure (certainly as to their secured status) and if the hoa is jr to the pretender at the time of f/c, they are pretty much out of luck if the f/c proceeds did not see enough money to pay off the hoa lien as well as the alleged money owed the pretender. The hoa lien does not survive a foreclosure. Pretty sure. But some hoa’s are selling their claims and liens to parties who will then take up the battle with the pretenders, so I’ve heard, at the time the pretender attempts foreclosure, not after. HOA’s have historically turned the delinquent hoa dues over to or for collection to third parties and as to the old days, those coll agencies sought a money judgment against the former owner.

  9. @robert wade

    Please do tell !

  10. I have accomplished a discharge of debt from a federal court signed by a Federal Judge as of June 15th of 2012 and I am about to record this at the county recorders office. In addition I will be making this publice in the local newspaper for a legal notice and receive affadavit from the paper to announce the property unencumbered by any mortgage or lien of any kind. It is and has been paid. success is sweet. Robert I. Wade.

  11. I would never nor recommend that someone buy property in a association, as the older they get the more frequent the assessments are charged and the higher they get as time goes by.

  12. HOA are a step above the banksters

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