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Subject: FL Foreclosure with reverse mortgage
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Author Messages
CyrillA
(Florida)

Posts:10


12/25/2018 9:20 AM  
Our association has 10 super old cases with outstanding HOA’s. We (the board) would like to close them so that we can have residents in the units who may HOA’s (for the vacant ones) and have owners who don’t pay out of here. We have a very tight budget/cash flow situation.

After putting pressure on Management Company and changing Lawyers we are finally shortly before our first foreclosure.

We are foreclosing on about 15k in outstanding HOA’s.
What is worrisome about that one is, that there is apparently a reverse mortgage on the unit. I am wondering why the bank did not foreclose earlier as owner was in multiple breaches of mortgage (does not live in unit, does not pay HOA, etc.)
Then I found out that outstanding reverse mortgage amount is 3 times (!!!) the current value.


Will anybody bid on this unit or shall we save ourselves the expenses to initiate foreclosure? What can we do to get this solved?


What happens if buyer buys unit? Will we get served our outstanding HOA, what will the bank do? Just write off a huge sum? Is the new buyer responsible for reverse mortgage?

Any help, advice, comment welcome...
TimB4
(Virginia)

Posts:16198


12/25/2018 10:17 AM  
Cyrill,

With foreclosures, those who have an earlier lien will be paid prior to the HOA.

In my opinion, the HOA should not expect to receive anything on a foreclosure.
The purpose of a foreclosure is to stop the bleeding.


FL law may allow some relief. Talk to your attorney.

Hope this helps,

Tim
GeorgeS21
(Florida)

Posts:1060


12/25/2018 10:24 AM  
Maybe I'm missing something ... an HOA is a "Home Owners Association." Are you using the abbreviation interchangeably with "Home Owners?"

I'm also not following on "... have owners who don’t pay out of here"

Same with "We are foreclosing on about 15k in outstanding HOA’s." (in this case are you saying 15K in outstanding HOA assessments?)

And, this? "Will we get served our outstanding HOA"

Please help me - others may be confused as well, or are better at reading between the lines ...?
CyrillA
(Florida)

Posts:10


12/25/2018 11:24 AM  
Hi GeorgeS21

Very good follow up questions, thank you and I will try to clarify - very well possible that i was jumping thoughts when I wrote the post.

I might have involuntary used HOA for both the association and the monthly fees aka assessments

We have outstanding fees/assessments from both owners that are still in their units and owners who abandoned their units. The board is trying to close these very old but still open issues.

Correct, the one case (with reverse mortgage) is referring to a case in which we have approx. 15k outstanding assessments. I have not talked to the lawyers yet to identify if the association is first lien or if there is another lien who will be served before us.

I hope that helps!

CyrillA
(Florida)

Posts:10


12/25/2018 11:26 AM  
Thank you TimB4

I will follow up with lawyers. The board initially thought we could get some money back but we since came to the realization that (in those cases) it is more than unlikely.

The questions is:

-Will somebody buy a unit with an outrageous high reverse mortgage (does the foreclosure makes sense)?
-In case it will not be sold, what are our other options?

Cheers

Cyrill
RoyalP
(South Carolina)

Posts:506


12/25/2018 1:54 PM  
'YOUR' foreclosure will merely 'force' the bank to forcelose on the PRIMARY (reverse) mortgage.

But, the bleeding will stop.

Expect up to one full year BEFORE y'all collect assessments.
CyrillA
(Florida)

Posts:10


12/25/2018 2:56 PM  
Thank you RoyalP

I will check that process with the lawyers

Cheers
ArtL1
(Florida)

Posts:131


12/25/2018 6:27 PM  
Posted By TimB4 on 12/25/2018 10:17 AM
Cyrill,

With foreclosures, those who have an earlier lien will be paid prior to the HOA.

In my opinion, the HOA should not expect to receive anything on a foreclosure.
The purpose of a foreclosure is to stop the bleeding.


FL law may allow some relief. Talk to your attorney.

Hope this helps,

Tim




That's not necessarily true. If the HOA forecloses, and a lender separately forecloses, whoever's case finishes first gets paid.

i.e. We had that situation...HOA member got way behind and in debt to the HOA and stopped paying his mortgage. We both foreclosed. We were "quicker" and got to auction the home first. We got everything we were owed from the auction proceeds (the home sold at auction for more than we were owed). The mortgage holder is still in foreclosure. It's now between the auction winner and the mortgage holder to figure out what will happen with the property.
CyrillA
(Florida)

Posts:10


12/25/2018 6:42 PM  
Thanks ArtL1, that is good to know!

Once the process starts I will post updates.
DouglasK1
(Florida)

Posts:1356


12/25/2018 7:40 PM  
Posted By CyrillA on 12/25/2018 11:26 AM

The questions is:

-Will somebody buy a unit with an outrageous high reverse mortgage (does the foreclosure makes sense)?
-In case it will not be sold, what are our other options?


My understanding is that foreclosure wipes out the mortgage. Any proceeds will probably go to pay the mortgage first, so the association will probably not see anything from that.

Florida is apparently unusual in that new owners are still liable for assessments from before they own the property. See FS 720 for HOAs or FS 718 for condos. Here is an excerpt:
(b) A parcel owner is jointly and severally liable with the previous parcel owner for all unpaid assessments that came due up to the time of transfer of title. This liability is without prejudice to any right the present parcel owner may have to recover any amounts paid by the present owner from the previous owner. For the purposes of this paragraph, the term “previous owner” shall not include an association that acquires title to a delinquent property through foreclosure or by deed in lieu of foreclosure. The present parcel owner’s liability for unpaid assessments is limited to any unpaid assessments that accrued before the association acquired title to the delinquent property through foreclosure or by deed in lieu of foreclosure.

The exception to this is if the first mortgage holder takes possession by winning the foreclosure auction, they are only liable for 12 months or 1% of the original mortgage amount.

Here is my understanding of the process:
The county sells the property at auction.
Proceeds are distributed to lien holders, with the first mortgage at the head of the line.
The new owners are liable for the entire past due amount and should be billed as such. The association can follow their normal lien/foreclosure procedure if the assessments remain unpaid.

Escaped former treasurer and director of a self managed association.
MelissaP1
(Alabama)

Posts:7928


12/25/2018 7:45 PM  
There are states that have what are called "Super Liens". Which puts the HOA on the SAME footing as the Bank. Otherwise the bank (If owed money) gets paid first and foremost. States with the "Super lien" option are on the same ground with the bank and it may fall along the lines of the "First come first serve" philosophy. I believe there are only like 8 states with this option.

I have done a foreclosure on a similar long term situation. As others have stated, a foreclosure is a Stop the bleeding action. It is NOT a profitable one nor should the HOA believe they will get their moneys back owed. Each state varies with their "right of redemption" period. Some have none and others up to a year. That period of redemption means the owner can buy their house back IF they pay the money owed, legal fees, and possible improvements. Basically no one can touch the house until the redemption period ends. Otherwise, they pretty much lose any investment money they put into the place.


The HOA does NOT want to own the home!!! I can NOT repeat or highlight this enough!!! It sounds like a great idea the HOA buys it at the first bid (Which the HOA gets $1 over beginning bid). However, no one factors in several factors... The bid is the money owed the HOA originally. (Just filling in a hole). The HOA can't touch the house for the redemption period. They may owe the bank the mortgage payments on the balance. So there are house payments. The HOA has to pay the HOA Dues! Yes, the HOA isn't exempt from paying it's own dues. The HOA would have to fix/maintain the home. They also would have to act as "landlord". Which a HOA is a GROUP of people not an individual. Oh and the HOA would have to pay the property taxes. Rent would have to be set at the rate it costs the HOA to own it. Not for Profit status may play a role subjecting any extra money to taxation.


Someone will suggest it no doubt that the HOA should rent it out I am sure. Do NOT do it! Just understand foreclosure STOPS as soon as they pay what is owed. Something need to make sure the owner understands. Plus make sure it's only for back dues/unpaid special assessments being foreclosed for. It can't be for fines in most states.


Be careful with the lawyer and make sure you have the correct type to handle this. You don't need a Real Estate attorney here. Plus do your research on the process for your state. Make sure there is a lien in place and proper notice given. Which means sending a certified letter to the HOA's address of that home. If they live elsewhere also send one to that address. Just keep any returned un-opened certified letters. Do NOT open!!! Need this for record keeping.

Former HOA President
CyrillA
(Florida)

Posts:10


12/26/2018 8:27 AM  
Thank you DouglasK1

How sure are you about:
My understanding is that foreclosure wipes out the mortgage. Any proceeds will probably go to pay the mortgage first, so the association will probably not see anything from that.

The association is foreclosing on the outstanding assessments (15k), the lender of the reverse mortgage has been very passive and did not act in any way so far.

I think the tricky part is the fact that it is a reverse mortgage...

CyrillA
(Florida)

Posts:10


12/26/2018 8:29 AM  
All very good points MelissaP1

Association does not want unit or bother with renting it out! Stop bleeding and have new owners asap (who don’t run into any problems with the unit) is our primary goal.
RoyalP
(South Carolina)

Posts:506


12/26/2018 9:12 AM  
..... I think the tricky part is the fact that it is a reverse mortgage... .....


YEP

The 'borrower' should have submitted a 'deed in lieu of foreclosure' application to the bank.

The 'borrower' could not care less as 'most' reverse mortgages end up way way way 'upside down'.

The bank 'messed up' by not following through on its mortgage 'obligations' since it is 'insured'.

What many banks DO NOT KNOW is that FMNA insurance lapses after 1 year unless the bank is ACTIVELY pursuing foreclosure.

The issuing bank is actually SOL if more than 1 year has elapsed since the mortgage 'should' have been called.

Once the bank forecloses (forced by your action) THEY will be the owner forced to pay assessments AFTER the foreclosure is filed with the Register of Deeds.


LET THE ATTORNEY FORCE THE ISSUE so that the bleeding stops.


('my' association juuuuust went through this issue with an estate)
TimB4
(Virginia)

Posts:16198


12/26/2018 9:41 AM  
Posted By CyrillA on 12/25/2018 11:26 AM

-Will somebody buy a unit with an outrageous high reverse mortgage (does the foreclosure makes sense)?




Unknown. If the owner is not paying assessments after several warnings, then yes, it's makes sense to foreclose.


Posted By CyrillA on 12/25/2018 11:26 AM


-In case it will not be sold, what are our other options?




If nobody purchases the property at foreclosure, then the property will be awarded to the HOA (likely with an unclean title - meaning somebody else can foreclose and take the property).

This isn't a bad thing. The Association will likely have to evict the former owner. Once that is done, the HOA will have to get the property ready to rent. The HOA may then rent the property (recommend on a month to month lease) until the bank forecloses. This can allow the HOA to recoup and perhaps make a profit on the issue (depending on how long the property can be rented).
CyrillA
(Florida)

Posts:10


12/26/2018 9:56 AM  
Thanks again RoyalP

The issuing bank is actually SOL if more than 1 year has elapsed since the mortgage 'should' have been called.
—->I think the statue of limitations is 5 years in FL, at least in this case

Once the bank forecloses (forced by your action) THEY will be the owner forced to pay assessments AFTER the foreclosure is filed with the Register of Deeds.
—> Are you saying our associations foreclosure will automatically force the bank to foreclose as well?
I have just learned that there is an auction date in January for our case! With the bank forced to foreclose as well, will our auction be cancelled and the bank becomes owner (and responsible to pay assessments)?

CyrillA
(Florida)

Posts:10


12/26/2018 9:56 AM  
Thanks again RoyalP

The issuing bank is actually SOL if more than 1 year has elapsed since the mortgage 'should' have been called.
—->I think the statue of limitations is 5 years in FL, at least in this case

Once the bank forecloses (forced by your action) THEY will be the owner forced to pay assessments AFTER the foreclosure is filed with the Register of Deeds.
—> Are you saying our associations foreclosure will automatically force the bank to foreclose as well?
I have just learned that there is an auction date in January for our case! With the bank forced to foreclose as well, will our auction be cancelled and the bank becomes owner (and responsible to pay assessments)?

TimB4
(Virginia)

Posts:16198


12/26/2018 9:59 AM  
Posted By CyrillA on 12/26/2018 8:27 AM

I think the tricky part is the fact that it is a reverse mortgage...




The name "reverse mortgage" is not really what it implies.

As I understand it, in reality the owner took out a loan (of x per month) with the property as collateral.


Foreclosure in FL:

New Florida Foreclosure Law in 2013 from nolo

Florida Foreclosure Laws and Procedures from nolo

Florida HOA and COA Foreclosures from nolo

Defending HOA Lien Foreclosure Claims - 8 steps to find defenses in HOA lien foreclosure cases
from an attorney's site but good info.




Reverse Mortgage info:

What Is a Reverse Mortgage? from reversemortgageguides.org

How Does a Reverse Mortgage Work – Definition & Requirements

5 Signs a Reverse Mortgage Is a Bad Idea from investopedia


CyrillA
(Florida)

Posts:10


12/26/2018 10:08 AM  
Thanks TimB4

The owner has left the place about two years ago, has not paid taxes or assessments (which include insurance)... These shortcomings would normally force the bank to foreclose the property.

I assume the bank does not want to foreclose so the do not become owner of the property and in turn responsible for assessments after obtaining ownership.
The question is, weather the HOA foreclosure will force the bank foreclosure to happen as well or not (as mentioned by RoyalP)

We (association) do not want to deal with renting out property...

It’s all in the details, isn’t it?
LetA
(Nevada)

Posts:636


12/26/2018 10:59 AM  
Posted By CyrillA on 12/26/2018 10:08 AM
Thanks TimB4

The owner has left the place about two years ago, has not paid taxes or assessments (which include insurance)... These shortcomings would normally force the bank to foreclose the property.

I assume the bank does not want to foreclose so the do not become owner of the property and in turn responsible for assessments after obtaining ownership.
The question is, weather the HOA foreclosure will force the bank foreclosure to happen as well or not (as mentioned by RoyalP)

We (association) do not want to deal with renting out property...

It’s all in the details, isn’t it?





Is Florida a state that gives HOA a super-priority on foreclosures? We have this mess here in Nevada, and it is finally being sorted out. HOA's have previously foreclosed then bid out the property at auction. Those bidders were never given a clear title to the house.
RoyalP
(South Carolina)

Posts:506


12/26/2018 11:41 AM  
Posted By CyrillA on 12/26/2018 9:56 AM
Thanks again RoyalP

The issuing bank is actually SOL if more than 1 year has elapsed since the mortgage 'should' have been called.
—->I think the statue of limitations is 5 years in FL, at least in this case

Once the bank forecloses (forced by your action) THEY will be the owner forced to pay assessments AFTER the foreclosure is filed with the Register of Deeds.
—> Are you saying our associations foreclosure will automatically force the bank to foreclose as well?
I have just learned that there is an auction date in January for our case! With the bank forced to foreclose as well, will our auction be cancelled and the bank becomes owner (and responsible to pay assessments)?





The 1 year applies to the 'Fannie Mae' insurance on the loan.
RoyalP
(South Carolina)

Posts:506


12/26/2018 11:43 AM  
Posted By CyrillA on 12/26/2018 9:56 AM
Thanks again RoyalP

The issuing bank is actually SOL if more than 1 year has elapsed since the mortgage 'should' have been called.
—->I think the statue of limitations is 5 years in FL, at least in this case

Once the bank forecloses (forced by your action) THEY will be the owner forced to pay assessments AFTER the foreclosure is filed with the Register of Deeds.
—> Are you saying our associations foreclosure will automatically force the bank to foreclose as well?
I have just learned that there is an auction date in January for our case! With the bank forced to foreclose as well, will our auction be cancelled and the bank becomes owner (and responsible to pay assessments)?





YES for all practical purposes, the bank can thereby recover SOMETHING. Or file under Fannie Mae for the insurance pay-out.

Else, zero, zip, naught.
ArtL1
(Florida)

Posts:131


12/26/2018 3:22 PM  
Posted By DouglasK1 on 12/25/2018 7:40 PM
Posted By CyrillA on 12/25/2018 11:26 AM

The questions is:

-Will somebody buy a unit with an outrageous high reverse mortgage (does the foreclosure makes sense)?
-In case it will not be sold, what are our other options?


My understanding is that foreclosure wipes out the mortgage. Any proceeds will probably go to pay the mortgage first, so the association will probably not see anything from that.

Florida is apparently unusual in that new owners are still liable for assessments from before they own the property. See FS 720 for HOAs or FS 718 for condos. Here is an excerpt:
(b) A parcel owner is jointly and severally liable with the previous parcel owner for all unpaid assessments that came due up to the time of transfer of title. This liability is without prejudice to any right the present parcel owner may have to recover any amounts paid by the present owner from the previous owner. For the purposes of this paragraph, the term “previous owner” shall not include an association that acquires title to a delinquent property through foreclosure or by deed in lieu of foreclosure. The present parcel owner’s liability for unpaid assessments is limited to any unpaid assessments that accrued before the association acquired title to the delinquent property through foreclosure or by deed in lieu of foreclosure.

The exception to this is if the first mortgage holder takes possession by winning the foreclosure auction, they are only liable for 12 months or 1% of the original mortgage amount.

Here is my understanding of the process:
The county sells the property at auction.
Proceeds are distributed to lien holders, with the first mortgage at the head of the line.
The new owners are liable for the entire past due amount and should be billed as such. The association can follow their normal lien/foreclosure procedure if the assessments remain unpaid.




That's not how it worked in our case. As mentioned, at our foreclosure auction, the home sold for more than the judgement we had against the member. We got paid. The auction surplus "belongs" to the member we foreclosed on, but he's not claimed it, so it was placed (by the court) with a trustee. The mortgage holder on the home still has a pending foreclosure case, and will ultimately either have the home auctioned again, or make a deal with buyer from our foreclosure auction. I assume (but don't yet know from experience) that if the mortgage holder has the home auctioned again, the buyer from our foreclosure auction will lose any claim they currently have and basically have wasted their $. That's why only fools and speculators bid on foreclosure auctions without doing due diligence to find out what other liens or litigation is out there against the home they're looking at.

The excerpt you quoted is common in HOA restrictions and basically boils down to:
"If a member is behind on assessments and sells their lot/home, the HOA has the right to collect that debt from either or both the new owner and previous owner. If the lot/home is successfully foreclosed on, the past due assessment debt is wiped out, and the new owner (or bank) is only liable for assessments going forward from the date on which they acquired title to the home as a result of foreclosure."
CarolF
(Florida)

Posts:416


12/31/2018 2:16 PM  
You mention "units". Is this a condominium? You also say HOA which makes me think
maybe these are individual homes. See Florida statute 718.116 if condo, or 720.3085
if individual homes.
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