A colleague of mine was recently in court waiting his turn for 2 hours listening to mortgage foreclosure cases all the while. During this time, he learned that some banks are telling delinquent owners NOT to pay the association assessments and instead direct that money to the bank during the mandatory mediations that are required in residential mortgage foreclosures. Some banks are actually telling people that they should just stop paying their HOA, condominium or cooperative assessment and other monies such as cable television in order for the banks to come to some sort of a settlement with the homeowner at the mediation. In the meantime, the delinquency owed to the association continues to balloon.
We all know that banks are taking forever to foreclose either because there is no incentive to do so or they can’t due to documentary hurdles but how many of us knew that some were actively working against associations getting paid??
It seems pretty simple, doesn’t it? If an owner has a finite amount of money and cannot pay both the association and the lender, the lender wants to grab as much as possible of those limited resources. We must educate every association member that if they are on the receiving end of this kind of advice from their lender it is very misleading and self-serving given that:
1. There is no defense to the association’s foreclosure (other than that the debt is not owed) which means that association foreclosures can typically be prosecuted much quicker than a bank’s foreclosure which can be stalled as a result of lost promissory notes, botched documents as well as numerous statutory and equitable defenses;
2. The bank’s liability once it obtains title (which is likely to happen since most loan modifications seem to fail eventually) is limited in any event for pre-title delinquencies; and
3. The banks are putting money in their pockets at the association’s expense which really means the expense of all those owners still paying their share of the assessments.
This information should strengthen the resolve of many associations to forge ahead with their own foreclosures. In addition, with this evidence in hand, our legislators might be more inclined in the 2011 Session to reconsider the statutory cap enjoyed by lenders which they managed to so skillfully protect during the 2010 Session.
This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.