Foreclosures: What to do?

A HOA can't protect you from foreclosure nor the MC. A HOA does NOT own a single house nor does the MC. The owner's IN the HOA own the houses. That means the owner's are responsible for their own home situation. You can buy insurnaces that's supposed to help prevent foreclosure situations on your own. However, that's something you need to talk to a Mortgage company about.

Banks are tricky when it comes to paying HOA dues. They tend NOT to. That's because if a HOA was to foreclose on their property (Owner) the FIRST entity to get paid is the bank. So the HOA risks doing a foreclosure on the behalf of the bank. The HOA only gets the leftover of the auction price if the owner owed the bank money. Banks/mortgage companies have their ways of getting out of paying dues on seized properties. Doesn't make it fair to the HOA but they do try techniques to avoid the dues.

Lisa:

I will go out on a limb here and say yes the banks are responsible. If I am wrong I am sure someone will correct me. They own the property they should maintain it and pay dues. What happens when they don't? Well, to me this would be one time I would ask a lawyer's opinion, because there is no reason why you shouldn't be able to lien on the home and fine them for non-compliance. I have never been in that situation, so don't have any expertise, just my thoughts.

Yes, of course you can fine and lien, but be aware the home will probably sell for what the bank needs or even less, so there will be nothing left for you. Remember most of these sub primes were creative financing and had very little down payment, and most of the payments that were made went to interest, and with the downturn of vaules, these homes have no owner equity and are probably not bringing even the amount owed.
But you should cite and fine these homes just to be consistent with enforcement or your remaining residents will have every right to be resentful when they get cited for the same "brown spots".
Don't forget too, these foreclosed homes selling at distressed prices will affect the values of every other home in your community. So much for HOAs protecting our home values. Harold

Thanks for all the input- I think the banks should have to pay HOA dues and comply with the CC&Rs just like everyone else. Are the banks going to? Let's be honest- probably not, but my point is that just because they're a bank doesn't give them immunity. When all the dust settles and our nation begins to move forward after all these foreclosures, perhaps the banks will factor in HOAs and the added financial risk of lending to a buyer who wants to purchase a home that will carry the added financial burden. Also, there will probably be new lending laws and restrictions moving forward, and if all the HOAs can show documented proof that we have lost money as an association group, and that our property values suffered due to the non-compliance of the banks, we may have more protection or more legal recovery rights in the future.

Thanks, Nancy. I am trying to see if we can increase the fines for landscape maintenence or specify something like "complete landscape neglect" that would make it more painful for the banks- they might realize it's more cost effective to keep the sprinklers on and pay somebody to mow the lawn twice a month than have the fines add up.

I am trying to get our CC&R Inspector Supervisor to get on board with fining the banks, because thus far, they're shrugging their shoulders claiming there's nothing they can do to make the banks comply.

I know we got a court order that allows us to go in and do basic landscape cleanup quarterly on a house that has been abandoned in our Association for over 15 years, and we send the owner the bill. Needless to say, they also owe us 15 years of HOA dues and fines.

Here's the "Rub" about bank's NOT paying the dues for the property that they own. What is the HOA going to do Lien or foreclose on them? I am not sure the legalities of placing a lien on a bank so I don't know if that is a possibility or not. It would take ALOT of work to accomplish for sure.

If the HOA tried to foreclose on the bank's property, that won't do well either. Ironically, the banks are the first one's paid in a foreclosure then the HOA. So the HOA may foreclose for $1K backdues the bank owes, but the HOA would get stuck with the home which would cause the HOA to own the house with a mortgage payment. It would just keep going round and round like this with no real benefit.

Now here's a tidbit. If HUD takes over the foreclosed property from the Bank, HUD will pay the dues plus any backdues! Go figure. A HUD foreclosure they will pay the dues owed while they own the property. Unfornately, by the time HUD gets the home from the bank, it's months down the road with an abandoned house and no reasonable course to collect until then. HUD usually takes over if the house doesn't sell at the bank's auction. If the house had sold at the bank's auctions then the new owner's would be responsible for the dues like they had bought the house "new". However, there would be a gap between the old owner and the new owner's dues the HOA would just be out of.

My foreclosed property I did, did sell at the auction but the bidder didn't pick up the house. They dropped out of the sale. So the bank got the home which somehow after 6 months got picked up by HUD. It then got purchased by an owner from a HUD auction. All of this took almost a year before the house ever got inhabital again. While it was empty a pipe broke to the upstairs bathroom and flooded the entire downstairs plus took out part of the ceiling. The house had about $10K of damage to it. HUD didn't fix it of course and sold the house "As is". They then did send us a check for the few months the house was in their possession. The bank NEVER did.

From the date the bank takes Title within the subdivision, the bank becomes legally obligated to maintain and to pay the dues from the date it took Title. Everything before gets wiped out in the foreclosure. When the bank goes to sell the house a statement is made for the closing attorney and the bank pays the dues at the closing. We do it all the time and all of the banks have paid their share.

We have had two bank foreclosures in the past 6 months. The first one we got all the past due with interest and the pool cleaning the HOA incurred because of a lien. It was not wiped out in the foreclosure. We placed the lien against the homeowner and the bank in one swipe. If the right person is contacted at the bank it can be done. It may take a little legwork but well worth it.

The second one comes up for foreclosure in 2 weeks. We have already submitted an estoppel to the bank for the balance on the homeowners account. Because of the amendments to FL statues 720 7/1/07 we will collect from the bank or whomever buys home. The statue says that "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."

Melissa P, I quoted the new FL statue, so it became law on 7/1/07. Before this law, it was whoever placed the lien first was the first to get paid, if there was any money left.This statue now gives the HOA some bite when it comes to collecting.

We have always done estoppels when a home in our community goes on the market. The person buying a home in our community cannot have a closing unless one of the documents from the HOA is a clean estoppel.

We can collect from the next homeowner the previous HO debt. Most foreclosures are because of mortgage default. That would mean the bank is the HO. Most individuals that buy a home in foreclosure, in FL anyways, will know that if there is a lien from XYZ HOA they will be responsible for the release of lien.

Our attorneys do not charge the HOA for a lien. A lien is also filed within a 4 month time of overdue fees.
They charge $450.for a foreclosure. I used to look at the HO mortgage balance and any other liens that are filed with the county tax clerks office.If there were IRS liens, I would not waste the HOA money for a foreclosure.

ZoaB, with sub-prime loans it is a different situation. There is not equity, so when the property is sold in a foreclosure how does the association get paid? In Colorado, the HOA is first in line for 6 months of assessments. Be careful, an HOA can encurred major legal expenses for naught.

Harold, it is called a "Super Lien". Following is an article by Janeen R. Hill, Esq. and Jonathan A. Goodman, Esq.

Question:
I just bought a property through the foreclosure process. I expected that the foreclosure of the first deed of trust would extinguish all liens against the property, including delinquent homeowner's association fees. Now the association is claiming a lien for six months of assessments, plus the attorneys fees spent attempting to collect them. Didn't the foreclosure clear the HOA lien from the property?

Response:
No, as confirmed by the recent Colorado Court of Appeals decision in First Atlantic Mortgage, LLC v. Sunstone North Homeowners Association, 2005 WL 427700 (Colo. App.).

Historically, HOA assessments were subordinate to the first deed of trust on a property, and had no recourse but to redeem if the senior deed of trust foreclosed on the property. The Colorado Common Interest Ownership Act ("CCIOA") was effective July 1, 1992. CCIOA is modeled on the Uniform Common Interest Ownership Act (the "Uniform Act"), some form of which has been enacted by more than 20 states. The Colorado version of the Uniform Act are in line with the Uniform Act as applied in other states, and so is the decision in First Atlantic.

The super-lien provision, Colorado Revised Statutes §38-33.3-316 authorizes the existence of a lien on a unit for "any assessment levied against that unit or fines imposed against its owner. Unless the declaration otherwise provides, fees, charges, late charges, attorney fees, fines and interest charged pursuant to section 38-33.3-302(1)(j), (1)(k) and (1)(.), 313(6) and 315(2), are enforceable as assessments under this article".
This lien is given priority to the first deed of trust on the property to the extent of

"An amount equal to the common expense assessments based on a periodic budget adopted by the association under section 38-33.3-315(1) which would have become due, in the absence of any acceleration, during the six months immediately preceding institution by either the association or any party holding a lien senior to any part of the association lien created under this section of an action or a nonjudicial foreclosure either to enforce or to extinguish the lien." What this means in practical terms, is that at a closing on the property after a foreclosure, the homeowner assessments will have to be paid. How much is owed?

In First Atlantic Mortgage, LLC v. Sunstone North Homeowners Association, 2005 WL 427700 (Colo. App.), the court held that the lien may be more than the assessments alone. The language of the statute is clear - that "assessments" may include fees, charges, late charges, attorney fees, fines and interest. The First Atlantic decision holds that the lien value has a cap of up to a total amount equal to six months of regular assessments, plus attorney fees, interest and other allowable items.

In light of this decision, lenders may think about escrowing for association assessments. Because of the inclusion of attorney fees, late charges, interest, and fines, the super-lien could wind up being larger than the amount of property taxes owed. Investors buying property through the foreclosure process, and any purchaser of an REO property should be aware of and manage the risks of the HOA super-lien.