PUD Rider - why doesn't the Bank enforce it?

Started by KarenT • 6 replies • 6808 views

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KarenT (Washington)
Posts: 250

Posted:

Just a question - most if not all of us signed a PUD Rider (required by your Lender) which states

"PUD Covenants - in addition to the covenants and agreements made in the Security Instrument, borrower AND lender furhter covenant and agree as follows: so long as the owners association ...... borrower promists to pay all dues and assessments imposed pursuant to the legal instruments creating and governing the PUD."

If a homeowner does not pay their dues, then the Bank should and why isn't this part of your escrow account just like your taxes and insurance????

Thoughts, comments????

TimB4 (Tennessee)
Posts: 21,059

Posted:

Kathy,

As someone pointed out in a similar question, the main reason why the HOA assessments are not part of escrow is because the note is sold multiple times during the life of the mortgage. Therefore it becomes difficult to keep things straight.

Additionally, since an Association can adopt special assessments, the mortgage company just doesn't want to concern itself with it.

Personally, I believe it is for the following reason:

If a foreclosure happens on the home the order of payment, as I understand it, is typically as follows:
1. Taxes
2. Legal Fees/court costs
3. 1st mortgage
4. 2nd mortgage
5. other debts

Since HOA fees fall into other debts and taxes are paid before the mortgage holder, It is in the best interest of the bank to make sure that the taxes are properly paid vs. any HOA fees. Similar argument for insurance as the bank needs to protect it's asset.

Since escrow is just a method of a bank saving money for a person to make sure personal taxes and insurance are paid an individual can easily do this themselves by having a set amount each month taken from their paycheck and placed in a savings account OR by utilizing their banks bill pay service so the bank issues a check off of the members account and sends it to the HOA once a month.

Tim

RichardP13 (California)
Posts: 1,767

Posted:

I have attached a copy of a PUD Rider. It says if the borrowers doesn't pay the lender MAY and the additional debt would be secured by the Security Instrument. I think we all know what may and shall means in legal documents.

The problem with trying to escrow HOA dues is cooperation with HOA and/or their Property Management company, being notified of any annual increase or special assessment. This is an issue that the national organization should try and address with the mortgage industry.

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WendyM5 (North Carolina)
Posts: 1,522

Posted:

I have a homeowner who hasn't paid hoa dues for so many years!!! I'm going to write his bank demand that they pay the Thousand or we will start the foreclosure process. He paid all his taxes every single year I bet he is up-to-date on his mortgage to. if the HOA forecloses on him the bank will be stuck with him and have to foreclose as well losing a valuable mortgage. I think in the rare instance where the homeowner is not behind this method works

vis ta vie

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By WendyM5 on 09/27/2022 7:28 PM
I have a homeowner who hasn't paid hoa dues for so many years!!! I'm going to write his bank demand that they pay the Thousand or we will start the foreclosure process. He paid all his taxes every single year I bet he is up-to-date on his mortgage to. if the HOA forecloses on him the bank will be stuck with him and have to foreclose as well losing a valuable mortgage. I think in the rare instance where the homeowner is not behind this method works

First, you don't demand anything from a loan servicer, you ask, generally nicely. Do you know who they are making payments to? It may not be the same lender who had the original loan, as they are sold multiple times during their lifetime. There is a registration system for every loan originated, much like tracking the VIN number on a car.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

Quote:

Posted By MaxB4 on 09/27/2022 8:04 PM

Yes I got the mers link from an old post of yours thanks for advice. Our management company wants to run my letter through their attorney because in North Carolina we have privacy laws and the management company is concerned that we don't have authority to release the amount the homeowner owes in dues to the mortgage company

this really doesn't make much sense because if we foreclose on them they're going to know exactly how much they owe in past dues when they get the Foreclosure notice

The attorney makes money by doing the foreclosure paper work so is very biased. Before your posts on this I didn't realize this was an option! Why aren't hoa lawyers taking this step first before foreclosure??? Seems like it's better for all involved

do you ever run into this privacy situation? Does the mortgage company's generally want to see proof of lien before paying??

vis ta vie

MaxB4
Posts: 3,513

Posted:

The management company should not have their attorney review your letter, it should be the association's attorney, if at all, reviewing it.

The loan servicer can pull a title report and see what liens, loans or judgments are attached to the property at any time. If the lien was recorded with the county, they'll be able to see that.

As far as why attorneys don't take this step, MONEY.

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