Associations Need To Be More Diligent During The Foreclosure Process

The inactivity of a homeowner or condominium association going through a foreclosure filing could vastly devastated their finances.

Homeowners and condominium association were doing an adequate job of collecting monies due to them including write-offs that were so troublesome or hard for the association to deal with. This is all before the market crashed in 2008, where the court system became highly overwhelmed with mortgage foreclosures and unchallenged cases would typically take at least 3 years to finalize. Associations have had to make changes in their collection policies because of submissive terminology in their governing documents and Florida statues. The amount of write-offs has caused the association to propose more special assessments, raise their monthly assessment payments, or go as far as file for bankruptcy.

Florida law states that when the bank who is in first line position forecloses on a property, they are exclusively responsible for all unpaid fees for up to 12 months of assessment payments prior to taking ownership or said property or 1 percent of the initial mortgage debt, whichever one is less, including then entire amount of fees racked up from the moment the bank took over the property until the property is sold. Due to the lengthy amount of time that it takes for a bank to foreclose on a property, associations no longer have the luxury of time, financially speaking, to wait for the bank to foreclose and a new owner to pick up where the bank left off in order to secure past due assessments. If associations wait for this to happen, they will nearly always have substantial write-offs.

Minimizing risk and costs while maximizing collections should be the objective for all associations. There are associations out there that have no changed their collection policies and are still under the impression that assertive debt collection will not always lead them to a larger write-offs but that it can take them to surpluses instead because said associations would not allow time and money to be waste while the bank takes 3 or more years to foreclose on a property. According to the Condominium Associations Institute, Florida has 46,000 associations, making it the largest amount of associations through the country at 14.2 percent.

RealtyTrac Inc., states that there are about 21,000 homes going through the foreclosure process and chances are that this homes are also behind on their association dues. If associations wait to pursue delinquent homeowners, they are directly contradicting their duties. The moment the association received notification that a property has been served a foreclosure complaint, they need to establish representation and immediately start taking action. One of the most beneficially and least used tool associations possess is collection rent from properties in foreclosure. A demand letter can be sent to the tenant, creating an agreement with the former owner, or the association itself can put a tenant in the unit. These are all great ways to collect or even create a surplus while the foreclosure process finishes.

If you have questions about Foreclosure, Loan Modification, Bankruptcy, Short Sale, or other alternatives, please feel free to call my office at 888-886-0020, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.