Just as your board read the bleak news each day about foreclosure freezes, investor losses, lawsuits, bank write downs and the “robosigning” scandal, so did the members in your community. I recently reviewed some of the depositions of former Bank of America and JP Morgan Chase employees which revealed that these financial institutions and their mortgage servicing departments hired hair stylists, Wal-Mart 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 publicly stated that they would launch a collective probe into the mortgage industry and many have done so. 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 owners 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 foreclosure, 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. The general purpose of such a letter is to dissuade any owners who think they can use the general confusion and scandal currently being discovered in the banking arena to avoid their obligations to pay their share of your community’s assessments.
We have drafted such a letter for our Firm clients and CAN members. I'm guessing your association attorney can help you in this regard as well. Will the 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.
This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.