I am being foreclosed upon by my HOA?? It is not at all uncommon these days, as struggling borrowers let the dues slide, thinking it's more important to throw all their cash into their mortgage payments.
Thirty-four states allow for judicial foreclosures by HOAs, although the rules and redemption periods differ. The redemption period is the amount of time that a homeowner has to pay up all the dues and fees after the HOA has officially taken title to the home.
Texas has a 180 day redemption period.
Florida's is just 10 days.
"People don't understand that by failing to pay the association dues they can lose their home and be put in the street," says Florida attorney Robert Tankel. He represents HOAs in Florida and his business is positively booming.
Sometimes, real property owners fall on hard times and they default on some type of a payment that's owed on their property. Usually, the creditor can either take action to enforce and collect the debt, such as foreclosing on a lien, or the property owner and the creditor can make a deal to settle the matter, which is called a "workout." Sometimes, a property owner has to declare bankruptcy.
All of these things can happen when the property is part of a homeowners' association (HOA). And, anyone who's a member of an HOA, should know how their HOA will react in such circumstances. Often, a HOA will be aggressive in collection actions when assessments and dues go unpaid, because it's simply not fair to other owners to shoulder the financial responsibility of a non-paying HOA member.
It has become a race to the courthouse steps because if there's a first mortgage foreclosure pending and the first mortgage foreclosure beats the HOA to the courthouse steps, then they wipe out the association's claim of lien. Since the big banks on average can take over a year to foreclose on a home, the HOAs can swoop in, take title, boot the borrower, and either rent or sell the home for a good six to twelve months before the bank comes in with the far bigger lien and forecloses again. Most regular real estate investors don't touch HOAs because the risk is high and the time for profit short said Tankel, cnbc.com.
Foreclosure:
Foreclosure is when a creditor, like an HOA if it has a lien against your property for unpaid HOA fees, takes your property as payment for the fees. Generally, you can stop a foreclosure immediately by paying all the fees that you owe to the HOA.
If you can't or don't pay the fees or file for bankruptcy, there are two types of foreclosure actions that your HOA might use:
•Non-judicial foreclosure, which allows the HOA to take your property and sell it at auction without a court order. This type of foreclosure by HOAs is allowed in only some states, including California.
•Judicial foreclosure, which requires the HOA to go to court and get an order authorizing it to sell your property, but only after the HOA gives you notice of the non-payment or lien and a certain amount of time to "cure" the default by paying the fees or assessments that you owe
The laws on foreclosure vary from state to state, so be certain to check the laws in your area to make sure that your legal rights are protected if your HOA attempts to foreclose on a lien.
Workouts:
It's not uncommon for HOAs to foreclose on a lien for unpaid fees and assessments, even if your debt amounts to only a few hundred dollars-remember, these are your fellow owners and neighbors, and the failure of an owner to pay his share of the common expenses is unfair to the group. However, it's likely that the HOA will agree to an arrangement like a payment plan to allow you to catch up on the amount you owe over time. This solution will save the expenses that come with foreclosure.
For example, you could arrange a monthly payment plan that consists of the regular monthly fee, plus an amount to be applied towards the arrears, so that you stay current on the regular fee and pay off the arrears over the course of one year.
In any event, the best advice is to pay your HOA fees on time. If you have a question about whether a fee is legitimate or too large, ask the HOA about it. If you can't afford the payments, try to work out a plan with the HOA before it begins foreclosure proceedings.
Many homeowners here in Santa Clarita live within HOA communities and find themselves in this exact situation. Anyone who is facing foreclosure should understand exactly what it's implications are, and what other options are available. Make sure you explore All of your options before you do not have any left to choose from. As Santa Clarita's Advanced Certified Distressed Property Experts we pay close attention to the changes as they happen, so that you can get the most relevant, current information, and the best possible service. If you would like to find out more about HAMP or HAFA programs, or someone you know needs assistance in avoiding foreclosure, please don't hesitate to call us we are here to help.
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Jennifer & Gary Ricco CDPE, PSC
Keller Williams VIP Properties
25124 Springfield Court Suite 100 Valencia, Ca 91355
661.290.3837
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