Foreclosing Lenders and Government Practices Penalize Innocent Homeowners
By: Roy Helsing
A reader writes: “I was at an HOA meeting recently and there was a discussion of possibly raising HOA dues in order to make up for the dues that are not being paid by properties that are in foreclosure. It is my understanding that under state law, banks do not have to pay HOA dues on foreclosed properties, and that the HOA members therefore have to make up for any deficits. Is there a way for the HOA to lobby for a change in this law? It seems highly unfair to pass such costs on to homeowners. The community is also hurt by this law because it encourages banks to keep these foreclosed homes abandoned rather than sell them to homeowners who would take care of the properties. If banks were required to pay the HOA dues on foreclosed homes, they would think twice before foreclosing on someone; moreover, if foreclosure were to occur, banks would be more motivated to sell the property rather than just sit on it until the market picks up. I would appreciate if you could investigate and write about this issue.”
Foreclosed properties are creating a large number of problems for homeowners living in homeowners associations. Your request is actually much broader than just this issue, and I will make dealing with issues caused by foreclosures a lead article in one or more newsletters after I finish the current series which has one additional article to complete. However, in response to your question, your understanding is not technically correct. Lenders are responsible for the assessments on a foreclosed property from the date they take title. Unfortunately, in California they are not responsible for any of the past due assessments from the owner upon which they foreclosed. To make matters worse, many lenders know this and delay the foreclosure in order to reduce the assessments they owe, or flip the property to a new buyer without letting the association know in order to avoid paying at all. Techniques on how to avoid this from happening will be the focus of future articles.
In addition, the government lately has been forcing banks to delay foreclosures and there is huge political pressure in some quarters to create “foreclosure free zones”. While much of this hue and cry has arisen because of questionable (if not illegal) practices by lenders, much of it is caused by the current political climate of “let’s do something to help people who have lost their jobs – they shouldn’t also lose their house!” Unfortunately, in homeowners associations that movement to protect those in foreclosure translates directly to higher assessments from those who do pay their assessments, because they become responsible to keep the lights on and offset the loss of revenues from those homeowners and lenders who are not paying their assessments. So, while technically you misunderstood what was happening – the net result is the same. The foreclosure market is having a very detrimental effect on homeowners who are paying. It is in fact income redistribution – but not from the wealthy or corporations – just from hard working homeowners like yourself while you get to pay the fees owed by your neighbor or the banks.
If any lender is reading this and you have some insight about why such practices are taking place, please write – I would love to give you equal time.
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