Posts Tagged ‘Foreclosure’

Superliens and HOA foreclosure in the news

October 16, 2014

A pair of Wall Street Journal bits today– a blog and a paywall-protected article– discuss HOA foreclosures.  An association can, in Idaho and most states, foreclose on its assessment liens.

What is unusual is that the blog actually looks at the rationale behind HOA foreclosures instead of taking the usual populist anti-HOA tone.  In doing so, the blog reports an argument that we have had to make many times in our own office:

“The problem is that [some] lenders aren’t doing what they need to be doing. They’re not fulfilling their obligation. All they need to do is fulfill their obligation in paying the assessments or to exercise their right to foreclosure in a timely manner,” says Ms. Bauman.

Most of this WSJ coverage is about states where HOAs have a “super-lien” that allows an HOA to get its money from foreclosure before the banks even get paid.  We don’t have that here in Idaho, where most CC&Rs explicitly subordinate the HOA’s liens to purchase price mortgages.  However, HOAs in Idaho also face the same banks and the same problems with foreclosure.  An idaho HOA in extreme cases may even see advantages to foreclosing subject to a mortgage, just to help the process move along.

The blog:

http://blogs.wsj.com/developments/2014/10/14/why-homeowners-associations-want-to-foreclose-on-homes/ 

The article:

http://online.wsj.com/articles/foreclosure-dispute-pits-mortgage-lenders-vs-investors-1413321865

PS, Ballard Spahr posted about similar super-liens in Colorado, recently:  http://www.jdsupra.com/legalnews/implications-of-a-homeowner-association-92787/

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Florida’s Freeway to Foreclosure

February 7, 2013

In a move that would recognize the value HOAs and condo associations add to their communities, Florida is considering a bill that would fast-track association foreclosures.  This would get defaulting/nonpaying owners and slow-to-foreclose banks out of the picture faster and allow the community to ensure that properties are marketable.  Hopefully the result would be a decrease in unkempt, deserted properties stuck in legal limbo for months and years.

It will be interesting to see how it all plays out.  There are some that challenge whether it is fair to require the owner to pay all back assessments in order to challenge the assessment foreclosure in court.  It seems to me that the law should simply distinguish between regular assessments and special assessments, for which the owner had title notice and should pay, and any limited assessments or fines piled on top of that.

Ranking: Brevard top U.S. spot for buying a foreclosure

 

http://www.orlandosentinel.com/business/os-overdue-hoa-bills-20130206,0,2306446.story

 

Foreclosing on the Forecloser II: Florida Foreclosing Fun

December 26, 2012

Apparently, somebody at CNN Money decided folks were done with the holiday cheer bit and were ready for some good old fashioned revenge stories.  Like the one where the Association owners start foreclosing on the banks that foreclosed on their neighbors.

Yes, an HOA CAN do that.  In fact, a lot of the usual reasons not to turn to foreclosure don’t apply when a bank owns the house.  The HOA can actually end up looking like the good guys compared to a foreclosing bank.

In my experience in Idaho, banks are relatively good at paying their bills.  As a group, they are just a little slow, and they try to avoid paying until they have a buyer lined up.  It makes sense that in a community with a high monthly fee, these fees could quickly hit the HOA’s bottom line and require quick action.

http://realestate.aol.com/blog/2012/12/26/payback-time-florida-homeowners-foreclosing-on-banks/

Assessment Update

November 20, 2012

To people who see their HOA assessments as “club dues”–an optional payment they choose to pay or not–the reality can be jarring.  In Idaho, and many other states, the association has a forecloseable lien on each homeowner’s property.  While foreclosing on houses is not profitable right now, it still remains an option for an association with few other enforcement choices.

An association’s lien is usually subordinate to a mortgage.  That means the mortgage would have to be paid first.   But, homeowners who head into a negotiation with an association threatening to foreclose ought to be aware that the HOA has different motivations than a lender.

While a lender may be interested in keeping a person in the home in hopes of future payments, when an HOA finally (and hopefully after many other attempts at enforcement) resorts to foreclosure, it is interested in getting a new owner into the property that can pay his share of the common expenses.  Keeping someone in the house who has proven not capable of meeting those burdens is not a priority, as it might have been for a lending bank.  Of course, other consideration also may come in to play, but it is good to understand these different dynamics.

http://www.firstcoastnews.com/news/local/article/283136/3/Homeowner-may-lose-home-to-delinquent-HOA-fees

Grand Theft HOA: Developer Board President Charged

September 12, 2012

Wow, Florida’s getting an unfair share of  juicy HOA news this week.

This story comes from Central Florida, where apparently people live in nice subdivisions on the everglade swamps between Tampa and Orlando.     

This guy, no Mickey Mouse fraud, was the developer of a homeowners’ association that was not finished before the bust in 2008.  Left an unfinished association and a bunch of empty lots, it appears Mr. Meadows decided to make the most of the situation by “financially exploiting” (per the State Attorney) the homeowners that had already bought in.

Mr. Meadows allegedly set up a rigorous and illegal fine schedule, charging as much as $100 per day for minor infractions.  The association’s funds went to contracted companies that Mr. Meadows owned, and occasionally  to pay unrelated bills like his personal mortgage.  He is charged with misappropriating over $500,000.

Fortunately, the State Attorney’s office got wind of it, and, after four years, has thrown the book at Mr. Meadows.

When a developer controls an Association, either here in Idaho or in Florida, many of the democratic processes and checks-and-balances that normally protect Association Members do not function.  However, owners need to be aware that they still have rights, and that the Association must be run according to state law.  Board members, whether they are elected or not, still owe fiduciary duties to their Association.  They must follow conflict of interest rules, make disclosures, and, at the end of the day, might get dragged off to Court.

Without awareness of homeowner association issues, and with no common interest ownership laws, it would be hard for homeowners to get the attention of prosecuting attorneys here in Idaho.  It would be difficult to find someone like Polk County’s Investigator Stephen R. Menge to dig into the nitty gritty.

Foreclosing on the Forecloser: HOAs take on the banks

August 13, 2012

For most homeowners, foreclosure is the end of the story.  The end of a long, painful story, for most.

 

A slideshow on foreclosure and bankruptcy law basics

 

But many homeowner associations could only hope that foreclosure were the end of the story.  For HOAs, foreclosure usually follows a lengthy period of unpaid assessments, collection efforts, and perhaps ongoing maintenance violations.  The foreclosing bank may even have dragged its feet on taking title until it had a post-foreclosure buyer lined up.  I have tried to summarize foreclosure basics for HOAs here.

In Idaho, this tactic leads to increased liability for the original owners of the property, and probably increased chances of bankruptcy.  For the most part, the bank that takes title following a foreclosure is responsible and pays assessments from the date of the foreclosure forward. However, this is not always the case.

In what is often a David and Goliath story, some HOAs are seeking to even the odds by foreclosing against the bank on their post-foreclosure assessments.  This article makes several good points about the pros and cons of this approach, and the position taken by banks.  It applies as well in Idaho as in Florida.

 

Most of the bank in possession has a strong interest in maintaining clear title so that the property can be sold.  Foreclosure, though a drawn-out and relatively expensive process, puts the pressure back on the bank to get current.

Jeremy O. Evans