Monday, November 29, 2010

Three ways to kickstart a lender’s foreclosure action


Ask any community association board member what their #1 complaint is right now and the answer is likely to be the detrimental impact lenders’ delayed foreclosures are having on their communities. Waiting around for the banks to foreclose is not a viable option for community associations. Associations can move forward aggressively, take title to delinquent properties and rent them out for the months or years it takes the bank to finalize its own foreclosure action. However, if the unit or home is uninhabitable or if the association simply prefers to attempt to force a lender to complete the foreclosure rather than taking title, the association does have a few options.

Here are three methods an association can employ to speed that lender foreclosure along:

1. Set the lender foreclosure action for trial. If the judge orders the case to trial as requested by the association, the lender must try the case (which it often is not prepared to do) or the lender will negotiate a positive result with the association to avoid a trial. Regardless of what the lender chooses to do, if the judge orders the case to trial, the association usually benefits.

2. Move to dismiss the lender’s case for Lack of Prosecution. If the lender foreclosure action has been stagnant for ten months or more, the rules of civil procedure allow the association to warn the lender that if it does not move its case forward before the conclusion of a year, the association will move to dismiss the case for Lack of Prosecution. This tactic cannot be used after setting the case for trial. However, depending on the circumstances, it may be the better tactic as lenders often ignore such warnings and judges today tend to be more willing to dismiss for lack of prosecution. Moreover, if the lender files something to avoid the dismissal, then the association can set the case for trial as described in #1 above.

3. File a Motion for Sanctions. One final method to be deployed in the event the lender is not moving its foreclosure action forward it to file a Motion for Sanctions. Arguably, by leaving open a case the lender does not intend to prosecute, the lender and its attorney are acting in bad faith. If the Motion for Sanctions is successful, the association would be awarded monetary amounts from the lender and possibly the lender’s attorney as well and the lender would have to conclude the case or negotiate with the association.

Every foreclosure case presents a different set of circumstances and challenges but if you haven’t already discussed your various legal options with the attorney handling your community’s collection work, it is time to do so.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

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