Melissa,
Richard is assuming the following occurs:
1) The Association went through the expense of obtaining a judgement lien (Note).
Typically an Association does not seek a judgement lien. They simply record the continuing lien they already have on the property. Typically if the member have the financial means to pay, this action will typically result in having the debt paid. If the member does not have the financial means to pay, the Association has the option of foreclosing on the lien to stop the bleeding and hopefully have someone buy it so payments will continue.
2) The note is valuable enough to attract investors.
Lets use Richards own words here:
"An Investor
may pay the full face value of a judgment lien
if their is equity in the house and the sale would cover the full value plus 18% interest accrued from the recording date. (or whatever the interest rate may be, it' 18% in MD)"
What he fails to point out is that if there is equity in the home, the owner would likely pay the lien to keep the equity. If there is equity in the home, when the owner sells, the lien would be satisfied at closing.
Of course what isn't being said is that if there isn't equity in the home, if foreclosed on it likely won't sell during a sheriffs auction and then the Association would have control of the property. If the property can't be sold at a sheriff's auction, it's unlikely investors will be interested in the note the Association spent additional funds to obtain.
"An Investor
would pay the full face value
if he can control the property for a few years and then sell the property for more than the underlying debt before the bank forecloses. "
It would be logical to think that if an investor can control the property for a few years prior to the Bank foreclosing on the property to satisfy their lien OR that the market was turning around and the investor wanted to gamble on the property value increasing enough prior to a banks foreclosure, that they would purchase the property at the sheriffs auction when the Association forecloses on the lien.
What Richard is implying is that the Association spend the additional funds to obtain a judgement lien, then, instead of foreclosing on the property themselves, sell that note to an investor and hope they will foreclose on the property. If one were to follow Richards advice and the investor chose not to foreclose, the Association would have failed to collect it's own investment (debt owed plus legal costs plus court costs) and the bleeding would continue as the current owner would likely still not be paying assessments.
Logically, one would also have to doubt that the investor would be will to pay the full face value of any note being sold.
Again, Richards auction house only works if the Association is willing to spend the extra funds to obtain a judgement lien vs. recording the continuing lien they already have which gives them the option of foreclosing.
Richard has openly admitted that he hasn't approached the Board of Directors in any of the Associations he owns property in with this idea. This gives me the impression that he really doesn't want his Associations to spend his money on obtaining judgement liens. He wants you to spend your members money on obtaining judgement liens and then use his service to obtain pennies on the dollar.
Have you noticed that Richard rarely answers the questions asked of him. Instead he prefers to deflect the question by asking you questions and insinuating that since he owns property in multiple Associations and pays his assessments that he knows more than you do. Perhaps, he doesn't want to answer those questions because he knows that if he does he would likely show that it's typically not worth the cost for an Association to obtain a judgment lien in the hopes of collecting pennies on the dollar.
Lets be honest, it makes more sense that
if an Association went through the expense of obtaining a judgement rather than simply recording their continuing lien that the Association likely knows of other properties, bank accounts or where the member works. Knowing this information, that the Association would collect 100% of what is owed by exercising that judgement on those other assets vs. selling the judgement at a loss of what is owed.
OH, to answer Richards question:
Quote:
Posted By RichardA14 on 04/13/2013 7:58 PM
SOMEONE ANSWER THIS Can Auctioning off and assigning those Current Delinquent Judgment Liens against non performing current residence bring the delinquency rate down below 15% so that HOA other homes in that community can qualify for FHA backed loans ?
Actually that 15% in arrears only applies to condominiums. Loans made on properties of single family homes are not limited by that guideline.
The answer to your question is yes, selling the a judgement lien would technically satisfy the lien on that property. Of course so would foreclosing on the lien and selling the property at a sheriffs sale.
The better method would be to have a written reasonable policy in place and enforced on all owners so the delinquency rate never approaches 5% much less 15%.
Richard, lets see if your actually willing to answer these questions (or if you will once again deflect):
1) How large should the debt become in order to justify the expense of obtaining a judgement lien (for the purpose of this discussion lets say a judgment lien will cost $2,000)?
2) Do you have specific proof that this is worthwhile for an Association? Please note, what I mean by that is are there HOAs that have gone through the trouble of obtaining judgement liens and then selling them not looking for info of selling judgements in general just those that were/are obtained by Associations.
3) How far do you believe should your Association allow a member to go in debt prior to recording a lien? (example 1 month, 1 year, etc.).