Tuesday, March 22, 2011

Why should an association monitor a bank foreclosure action?

In order for lenders to enjoy a statuory cap on liability for past due assessments owed to community associations, they must name those associations as defendants in the lender foreclosure actions. At that point, associations must make a decision to answer the complaint or simply ignore a lawsuit to which they are a named defendant.

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.

1 comment:

  1. I live in illinois and i was in foreclosure the first part of the year until june when my foreclosure was discharged. I was charged 60 dollars a month for a foreclosure monitoring fee on top of the home association dues which I paid every month. Now, 4 months later I get another bill for 60.00 for monitoring fees AFTER the foreclosure was discharged. Do I have to pay this? I am so pissed off about it, the HOA will not waive the fee and says I have to pay it. It's not the 60 dollars, it's the point of being ripped off like this. Do you think I can fight these fees in court and have the HOA pay my attorney fees as well?