Q&A: What Happens After the Association Acquires Title by Foreclosure?
A reader recently posed the following inquiry:
I am interested in your thoughts about Fee Simple Communities foreclosing on properties and working with the banks to accept a short sale. As President of a small community (65 units) HOA, we have foreclosed on 3 units and soon to be 5. All but one have a mortgage and all 4 mortgages are above the value of the property. The banks are not accepting short sale offers without involvement from the mortgagor which in cases in close to impossible. Three of the banks are in foreclosure with the longest process exceeding 3 years. Motions to compel are denied and we are looking for creative ways to speed this process and begin to collect from a new homeowner or at least get my 1%/12.
This situation is becoming more and more prevalent throughout the State. Attorney Kevin Miller provides the following comments:
A motion for case management conference can be a useful tool on behalf of any association involved in a mortgage foreclosure action. In this motion, the association's counsel asks the court to establish reasonable deadlines to bring the case to conclusion, ultimately resulting in a foreclosure sale whereby either the mortgagee or another party will take title to the property. In instances where the association has already foreclosed and taken title to the property, and the mortgagee has filed its own foreclosure, the association may be able to simply consent and stipulate to a judgment and either bring about a sale or transfer of title much sooner. Particularly when the foreclosing party plaintiff is the mortgagee and the defendant owner is the association, and there are no other parties to the action.
What about the 'short sale' option?
The U.S. Treasury announced new federal guidelines that give lenders a 10-day limit in which to respond to short sale purchase offers. These rules may provide much needed relief, as the Sun-Sentinel reported approximately 40% of South Florida homeowners owe more than the property is worth. The rules also provide financial incentives for both sellers and lenders.
Is the Association really entitled to any payment from a first mortgagee when the it forecloses its mortgage after the Association has foreclosed its claim of lien?
Remember, the statutes provide for joint and several liability with the previous owner (with the exception of the safe harbor provisions for first mortgagees). Thus, once the Association takes title to a unit or home after completing a lien foreclosure case, it technically becomes liable for the debt of the previous owner and cannot necessarily seek to collect that debt from a subsequent owner, even if the subsequent owner is a mortgagee. Any subsequent owner (mortgagee or otherwise) bears responsibility for payment of all assessments from and after the date title is acquired.
We will address additional options in further posts, including the benefits and detriments to renting the properties acquired as a result of foreclosure. Stay tuned.
What if a HOA forecloses on a homestead that is free and clear?
What if the property is in a revocable trust?
What is fair and reasonable attorney fees for doing an average foreclosure? (for bnak mortgages I think it is 1% of the outstanding balance)
If a Lis Pendens has been filed, doesn't that mean the HOA has to have an interest in the property and sell on court house steps to get its money, versus a money judgment?
Our condo. assoc. has a lien on a unit for arrears in maintenance for about $5,000. the owner has a short sale offer and has offered the assoc. $2,000. to settle the lien. Otherwise the lender will foreclose. In a foreclosure the assoc. might recover $1,200.00. (6 months maintenance fee). Is there a method to collect the balance from the owner?
There has to be a better way for an association to get the monies due from delinquent owners. Placing a lien on the property doesn't help becuase most times the owner isn't paying the mortgage either.
Then the banks aren't foreclosing because they would then be liable for the monthly dues, (whether 6 months or 1 year of past dues) but certainly all future dues.
The owner has abandoned the property. So the association has a vacant unit that we are not able to get monies from.
Is there any possibility that the association can take control of the unit for a set time frame, say 1 year, and get a renter in the unit and collect the rent to cover the past dues and future dues.
The banks don't want to foreclose, the owners are gone and aren't paying anybody anything and the assoc. is having to raise dues to cover the loss of income from the dead beats.
This would be a win-win solution for the banks and Associations. The bank can foreclose in 1 year and all back dues are erased, the unit is occupied and maintained by the association, the association is receiving the needed revenue to maintain the entire complex and fund the reserves.
We have 20 out of 138 units that are not paying dues and we are paying our attorney a boat load to run the court gamet trying to get banks to foreclose as they are required to.
Please help
Thanks