As an attorney, I could never recommend that anyone named in a lawsuit simply ignore that action. However, many associations take the position that since the association's lien is subordinate to the lender's there is no reason to get involved in the lender's action. Right? Absolutely not.
If the association does not at least answer and monitor the progress of the lender's lawsuit, the lender may obtain a judgment that prevents the association from enforcing its statutory rights including the collection of the lesser of 12 months past due assessments or 1% of the original mortgage debt.
In the current economic climate, it might also be advisable for associations to take affirmative action within these mortgage foreclosure cases to bring them to a faster conclusion. Alternatively, if the association is renting out a property that it acquired in its own foreclosure action (or is collecting rent pursuant to the new statutes), it may wish to defend itself in the lender's action to actually prolong the process in order to continue collecting rent to recoup past due amounts owed.
Lastly, where the association has its own pending foreclosure action against an owner, it is important to monitor the lender's foreclosure action to determine the feasibility of moving the association's action forward in light of the bank stalling.
If an association does not allow its attorney to answer and monitor a lender's foreclosure action, it may waive many of the rights and options otherwise available. The benefits of preserving these rights and options generally outweigh the attorney's fees and costs incurred by the association. Furthermore, if the association allows counsel to monitor the lender's foreclosure action, the association's attorney will receive copies of all pleadings filed in the case. This is important to keep the association apprised as to the status of the case and especially its conclusion so that a demand for statutory past-due assessments can be made promptly.
Think twice before telling your attorney to ignore those lender foreclosure actions in your community!
This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.