Category Archive 'Foreclosure':
A sad HOA foreclosure story
June 29, 2010 – MICHELE NORRIS, host:
From NPR News, this is ALL THINGS CONSIDERED. I’m Michele Norris.
MELISSA BLOCK, host:
And I’m Melissa Block.
Now a story that will make you think twice about ever skipping a payment to your homeowners association. In many states, those groups have the power to foreclose on people who don’t pay their dues and they’re doing it more and more. In Texas, the number of foreclosure filings for delinquent association dues has increased tenfold in just the last few years.
NPR’s Wade Goodwyn reports.
WADE GOODWYN: Captain Mike Clauer was serving in Iraq last year, company commander of an Army National Guard unit assigned to escort convoys. It was exceedingly dangerous work – explosive devices buried in the road were a constant threat to the lives of Captain Clauer and his men.
Captain MIKE CLAUER (Commander, Texas Army National Guard Unit): We’ve had lacerated livers, broken femurs. Of course, backs blown out and things like from the EFPs and stuff that they’ve hit.
GOODWYN: Clauer was halfway through his deployment when he got a frantic phone call from his wife, May, back in Texas. It was a bolt from the blue.
Capt. CLAUER: That’s when she was bawling on the phone and everything and was telling me that the HOA had foreclosed on our house and it was sold. And I couldn’t believe, you know, that could even happen.
GOODWYN: The Army captain had a hard time understanding what his wife was saying. His $300,000 house was already completely paid for. Could it be possible that their home was going to be foreclosed on and sold because his wife had missed two payments of their homeowners association dues?
Capt. CLAUER: So I was really in a hurry trying to get home before my family was living on the streets.
GOODWYN: But by the time Mike Clauer got back to Texas, it was too late. Their four-bedroom, 3,500-square-foot home had been sold on the courthouse steps for outstanding homeowners association dues and legal costs. Total: $3,500. The new owner quickly sold it for $135,000, netting a tidy profit.
Capt. CLAUER: Basically, it’s everything to us. I mean – you know, I mean, having a house like this paid for was huge for our retirement plans.
GOODWYN: Lawyers for the homeowners association say that while Captain Clauer’s case is regrettable, it was his and his wife’s fault for not paying their dues in a timely manner.
Patrick Whitaker represents the HOA.
Mr. PATRICK WHITAKER (Attorney, HOA): But the fact of the matter is, the laws of the state of Texas allow homeowners association to file assessment liens on properties who haven’t paid their assessments, and they also allow foreclosure on those liens. And the homeowners association followed the letter of the law.
GOODWYN: In many states, it is not difficult for a homeowners association to foreclose on a member’s home for past dues, even if the amount owed is just a few hundred dollars. And in 33 states, a homeowners association does not need to go before a judge to do it. It’s called non-judicial foreclosure, and in practice, it means a house can be sold on the courthouse steps with no judge or arbitrator involved. In Texas, the process period is a mere 27 days, the shortest of any state.
David Kahne is a Houston lawyer who advises homeowners. Kahne says that in Texas, the law is so weighted in favor of homeowners associations that he advises people that instead of hiring him, they should call their HOA and beg for mercy.
Mr. DAVID KAHNE (Attorney): I suggest you call the association and cry.
GOODWYN: Kahne says if a homeowner misses a couple of homeowner association dues payments, the 250 or $500 they owe often becomes $3,000 after the homeowners association’s lawyers add their legal fees. It is not the homeowners association who has to pay the lawyer’s bill, but the delinquent homeowner. If the homeowner wishes to contest and loses, they’re on the hook for legal fees that could run deep into the double digits of thousands of dollars.
Kahne says that as the economy has gone under, homeowner association management companies and HOA lawyers have been making millions off of homeowners through this foreclosure process.
Mr. KAHNE: We’re having literally thousands of lawsuits filed over very small amounts of money. And those very small amounts of money rapidly become large amounts of money when the association attorneys add their bills.
GOODWYN: Suddenly faced with a demand that they pay $3,000 immediately or lose their home, many disbelieving homeowners don’t know where to turn. Some call their local TV news who they believe will share their outrage, and they’re right.
(Soundbite of news clip)
Unidentified Man: Guys, our investigation found that the number of HOA foreclosures by subdivisions, like the Lookout Canyon Creek here behind me, are skyrocketing.
Tony Goodman’s(ph) house is being taken from him.
GOODWYN: With the recession, the percent of foreclosure filings for delinquent HOA assessments in Texas has increased from between one to 2 percent of all home foreclosures to more than 10 percent, according to the industry. Over the last 20 years, homeowners associations have exploded across Texas. While there are 1,100 municipalities, there are now 30,000 HOAs. And HOAs have far more power than Texas cities or counties to take a citizen’s home away from them.
The perception that the balance of power has swung too far toward homeowners associations has begun to permeate the Texas legislature. Reform legislation has passed the Texas House of Representatives, but still no bill has been able to make it through the Texas Senate.
Republican State Senator John Carona represents Dallas.
State Senator JOHN CARONA (Republican, Dallas): Remember, associations are a collection of neighbors. The goal has to be to work well together to have a harmonious community and to create a lifestyle that people enjoy and want to be a part of.
GOODWYN: In Texas, serving in the state legislature is a part-time job. In addition to representing Dallas, Carona owns the largest homeowner association management company in the country. Associa is in 30 U.S. states and Mexico, with more than 100 offices, 6,000 employees and 7,000 HOA clients.
Carona defends HOAs’ right to foreclose for delinquent dues, even for small amounts.
State Sen. CARONA: If an association did not have a means, a forceful means to collect that money from any homeowner who, for whatever reason, couldn’t pay, well then it really places an unfair burden on every other owner in that association.
GOODWYN: There have been complaints that some members of homeowners association boards have bought for a pittance properties they forced into foreclosure, then sold them for a hefty profit. In Texas, there are no laws to prevent this.
Carona says the best way to address this apparent conflict of interest is not by passing new state laws, but by letting the HOAs handle it internally through modifications to the homeowners association constitution.
State Sen. CORONA: I think that an association can avoid that type of thing by simply adopting conflict of interest rules.
GOODWYN: Republican State Representative Burt Solomons from North Texas has been trying in vain to pass HOA reform legislation. Solomons says during state legislative hearings, there was no shortage of outraged homeowners, but he acknowledges the HOAs, their property management companies and their lawyers fought back effectively.
State Representative BURT SOLOMONS (Republican, North Texas): We have people who would come and testify that would say, well, we need the power to access and fine and foreclose, and we need the money. And we look for people in violation of the rules and restrictions that we put in place. And they drive around in golf carts looking for them.
GOODWYN: In theory, HOAs are only supposed to foreclose for nonpayment of dues. But Solomons says that through a loophole in Texas law, in practice, HOAs can foreclose for nonpayment of homeowners association fines, too. The North Texas representative watched with frustration last year as his reform bill died in the Senate.
As for Army Captain Mike Clauer, he’s gone from fighting in Iraq to fighting his homeowners association in Texas. If he weren’t in the military, Clauer would have no legal recourse at this point. But in a spasm of gratitude in 2003, Congress passed the Servicemembers Civil Relief Act, which was supposed to prevent non-judicial foreclosures against military personnel fighting overseas.
Capt. CLAUER: Hopefully, we’re going to get the house back. That’s what we’re fighting for, that the judge will understand what had happened, that this was illegal, that the HOA can’t do what they had done.
GOODWYN: If a federal court decides in favor of the Clauers, the foreclosure and subsequent sales of their home would have to be unwound and the deed returned to them. If they lose, the good captain’s nice, paid-for, suburban home would be lost to his family forever. The case goes to court early next year.
Wade Goodwyn, NPR News, Dallas.
Foreclosure by your HOA
Article on HOA foreclosure by Fox Business 10/13/2010
Homeowners associations (HOAs) have a history of foreclosing on owners to collect relatively small sums of money. For example, in one California study, the median amount owed in HOA was just over $2,000; in all other cases it was over $190,000. One family even lost their home because of a $120 HOA arrearage! Learn how to avoid an HOA foreclosure and how to sidestep the ways some HOAs use to try to take your home.
There are many laws in place to protect homeowners from foreclosure by their lenders or other claimants. Borrowers are protected from mortgage lenders foreclosing with bankruptcy proceedings, through homesteading, and through forced mediation in many states. But HOAs don’t face these same restrictions.
In California, for example, associations may begin the foreclosure process only 75 days after a missed payment was first due, while a tax collector must wait five years before beginning the foreclosure process for a tax lien. Associations are not required to go through a court to foreclose, as a property owner would to evict a tenant. Also, homeowners do not receive the benefit of the homestead exemption when their house is foreclosed upon by an association, as they would in the case of any other money judgment.
Why foreclosure is the preferred collection method
Why should HOAs use foreclosure to collect relatively small amounts when there are other effective ways to get their money, such as small claims court? There are a couple of reasons. In many cases, there are attorneys on the HOA board or working for or with property management companies who make a lot of money providing foreclosure services. HOAs have the power to run up several thousand dollars in late fees, interest, fines and attorney charges for a delinquency that may total only a few hundred dollars. They then use the threat of foreclosure to collect that amount. This has led critics to call the procedure a “shakedown racket.” There have also been allegations of board members who push for foreclosure, buy the properties themselves and flip them for big profits.
The Dallas Morning News report that HOAs are foreclosing with little warning to folks who miss their monthly dues. In one case, a soldier in Texas had his house sold at a foreclosure sale while he was in Iraq. His wife was suffering from depression and missed two monthly payments (total arrearage= less than $1,000). The $300,000 home fetched $3,500 at auction (the buyer reportedly flipped it for a 3,700 percent profit). And that’s the real crime — the devastating loss of home equity due to the massive discount of the home’s price at a foreclosure sale. So the family would have received almost nothing after the HOA took its late payments and piled on the collection fees.
In 33 states, an HOA does not need to go before a judge to collect on the liens. This is called non-judicial foreclosure and it’s a big hammer in the hands of an abusive HOA. Since the start of the recession, Texas foreclosure filings for delinquent HOA assessments have increased from about 1 percent of all home foreclosures to more than 10 percent, according to an NPR report. And in Texas, it only takes 27 days for a homeowner to go from missing an HOA dues payment to being homeless.
Some methods include
There are attorneys who advertise that they help HOAs earn extra money by foreclosing on owners who miss payments. One practice is refusing to accept partial payments. The homeowner comes in with a partial payment, which is refused, and he or she is told that the balance is even higher due to late fees and collection charges. In some states, there is a minimum amount that must be past due in order for the HOA to foreclose. If that’s the case, the HOA and their lawyers work at getting homeowners past that threshold by piling on fees and refusing to accept anything but payment in full. Once the amount owed gets big enough, they pull the trigger and take the house.
Other involve hitting you with minor infractions, such as the state of your shrubbery, then adding big fines and finally foreclosing.
If you tangle with your HOA, your best bet is to pay what they say you owe, then take them to small claims court to get it back.
If you can’t get caught up, and the HOA racks up huge fees and you are in danger of foreclosure, a bankruptcy filing can discharge all of the past-due HOA dues and the attorney fees, and save your home. But if the HOA hits you with additional charges after you file, you’re on the hook for them as well.
The HOA’s side
With the mortgage foreclosure epidemic, many HOAs find themselves in trouble. Homeowners let payments slide and associations with more than a 15 percent delinquency rate find that members can’t sell their properties because mortgage lenders don’t finance anything in an HOA with a high delinquency rate. So the answer for them is to swoop in and foreclose before the mortgage lenders do (once that happens the HOA claim is often extinguished), take possession of the property, and rent it to get the dues current so that members can sell their homes.
Ironically, at a time when most mortgage lenders are bending over backwards (using HAMP and other modification programs) to work with borrowers, HOAs are breaking records for fast foreclosures. So while you could be negotiating with your lender to save your home, your HOA could be positioning itself to sell your home on the courthouse steps at the same time.
This article was originally published on HSH.com
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Read more: http://www.foxbusiness.com/personal-finance/2010/10/13/homeowners-association-really-foreclose-home/#ixzz26aXdwGCm