Most of us are reading the bleak headlines each day about foreclosure freezes, investor losses, lawsuits, bank write downs and the robosigning scandal. I read recently that hundreds of depositions of former Bank of America and JP Morgan Chase employees are now revealing that these financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and assembly line workers and gave them the title of “foreclosure expert” with no formal training. Many of these folks testified that they barely knew what a mortgage was, had trouble defining the terms “affidavit” and “complaint” and some even admitted under oath that they knew they were lying when they signed the banks’ foreclosure affidavits.
Signing things you don’t understand, however, is just the tip of the iceberg. The real issue is ownership of these loans and who has the right to foreclose. Attorney Generals in all 50 states have stated that they will launch a collective probe into the mortgage industry. If you thought the banks were taking a long time to foreclose on delinquent properties in your community up until now, just imagine the amount of judicial scrutiny that will take place over the next few years when that bank’s counsel walks into court seeking a foreclosure!
How many of your community members are reading these headlines and breathing a sigh of relief that their own foreclosure will surely be stalled or derailed entirely? How many of these folks think this also means that the association cannot foreclose on them as well?
I know that many of you are expeditiously pursuing delinquent accounts in your communities. How many of you, however, are advising the entire membership (not just the delinquent owners) about what you are doing and why? Have you sent out a letter to your entire membership advising them of the following:
• If they are fighting their bank foreclsoure, working on a mortgage modification or if their bank has put its foreclosure on hold, they still must pay the association assessments! It doesn’t make much sense to work out your bank issues only to lose your home to your association foreclosure!
• It is much easier for a community association to foreclose on a home than it is for a bank to foreclose on the same property. Mortgage foreclosures can be attacked if the promissory note is lost or missing, if there are problems with the Truth In Lending Form, RESPA violations and now faulty affidavits among other items. Association foreclosures cannot be defeated because the owner challenges the validity of the most recent election, claims the common areas haven’t been maintained or has any other complaint other than that the amount is not due and owing.
• Owners with financial difficulties should be advised that avoiding their obligation to the association will only add to those difficulties. What might have been a delinquency of less than $1,000 can quickly become an amount several times more than that if the matter is turned over to the association’s attorney for collection.
I recommend that every association send out a letter to its membership reminding them of the association’s collection policy, when amounts become delinquent and how long of a grace period is given before the file is sent over to the attorney for collection. This same letter should debunk some of the myths and confusion out there about why and how associations foreclose on homesteaded property and what should be done to avoid becoming another foreclosure statistic.
Will such a letter cure all that ails your community? Absolutely not, but if reading it convinces one or two of your owners to continue paying their assessments, it is invaluable. Please don’t hesitate to contact me if you would like us to prepare such a letter for your use.
Lastly, some other recent reading added to my thoughts about this blog. Do you know which four states had the highest foreclosure rates in August? You are living in one and Florida is joined by Arizona, California and Nevada. In fact, one in every 155 Florida houses received a foreclosure notice which is 2 1/2 times the national average. Contrast that with a recent move last week by the City of Shanghai, China to prevent families from purchasing more than one home in that city in an effort to cool down surging property prices and curb “irrational demand”. Housing prices in 70 major Chinese cities rose 9.3% in August from the previous year. Bejing implemented a similar “one home per family” rule last Spring. We can’t give away many of our properties while Chinese citizens can’t buy property in their country quickly enough! Go figure.