Foreclosures and Liens

Started by JimC10 • 10 replies • 4053 views

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JimC10 (Virginia)
Posts: 4

Posted:

We have several homeowners are going into foreclosures and are past due in VA. If we placed a lien on the property does that get dismissed? My understanding only liens get dismissed if the individual files for bankruptcy, so if they are going through a foreclosure which guessing the bank takes back ownership or accept some short sale the lien would remain? If bank takes ownership I guess the lien is wiped out so the HOA would have to ask for dues for the current year or place a lien on property so bank can't sell it until paid?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A lien doesn't get washed out. It is just a slow process that it may seem like it. Today's world, house foreclosures now take over a year or more to process. Which means that lien is stuck on that property until the foreclosure process is finally completed. Once that happens, then the lien should be addressed by the bank. The lien should be paid prior to the new owner's taking possession. The new owner's aren't responsible for the past owner's debts. If the new owner pays the lien or the bank does, it should be sorted out during the sale.

Some states allow what is called a "Super lien". It's a stronger type lien that more likely guarantees the HOA to see their money. I am not clear on how that works so consult an attorney. There are trade-offs in those type of liens that may not be favorable.

I HIGHLY recommend the HOA NOT pursue any type of foreclosure against these homes that are in foreclosure already by the bank. That's a complete waste of funds. It's best to file a lien, wait, and hope for the best...

Former HOA President

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Jim,

The way I understand it, unless you have a priority lien (which you likely don't), it gets dismissed if the property is foreclosed because of a higher priority lien.

Liens are usually assigned priority based the order in which they are applied (except for taxes, which often have first priority (by statute).

In other words, the mortgage holder likely has a first priority lien which has existed since the home was purchased. If the HOA now files a lien, it will be a lower priority. If the holder of the first priority lien forecloses, they are not responsible for settling lower priority liens, so the HOA's lien becomes meaningless.

Short answer, you won't get your money.

JeffR7 (California)
Posts: 251

Posted:

Jim,

Bruce is absolutely correct. Unless your state allows for HOA liens to be a "super liens" you will not get your money from the mortgage company. Most senior lien will always wipe out all more junior liens. The order of liens as follows (at least in California) - Property Taxes, Mechanics liens, first mortgage, second mortgage, any other liens recorded in order of recording.

But all hope is not lost. In California HOA debt is a personal debt and you can go after the owner and his/her assets personally after the foreclosure. Unless of course they file a bankruptcy. We have been successful in collecting money that way but going to court and getting a judgment. In one case we've attached this judgement to another property owned by the person and threatened to foreclose. That gout our debt paid withing days.

Good luck.

CarolF (Florida)
Posts: 435

Posted:

Once again, it depends on the state. In Florida, if a financial institution holding the mortgage gets title to the property through foreclosure (judgement is only issued in a court), then the association (if a lien has been filed) will be paid 1 years back assessments or 1% of the mortgage amount, which ever is less. Then the institution is obligated to pay the assessments while it is holding title to the property.This now applies to both condo associations and homeowners associations. There are currently some proposals to make foreclosures non-judicial, but I doubt that will happen. Our courts depend on the funds they obtain through filing charges for foreclosures.

BradP (Kansas)
Posts: 2,640

Posted:

as everyone has stated it depends on the state. In bankruptcy the person would have to list you as a creditor and then you would have an opportunity to appear before the judge or whoever presides over the hearing if you so desire. Depending on the type of bankruptcy and how much is owed it will either get dismissed or set up in a payment plan. However, if the person does not list you and the debt on their creditor sheet then once the bankruptcy is discharged they are fair game. We recently had a home do that, we weren't listed so the debt is still valid, problem is the home appears to be going through foreclosure so we are up a creek anyway.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

I would consider a bank-initiated foreclosure as a process that wipes off an HOA lien in Virginia - no collection of delinquent dues.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

I would consider a bank-initiated foreclosure as a process that wipes off an HOA lien in Virginia - no collection of delinquent dues.

FredB4 (Ohio)
Posts: 375

Posted:

Some banks also put the home up at Sheriff sale for a minimum price and typically buy it back themselves. That does wipe out any liens, debts etc. on the property. The advantage there is that the bank then owns it and has to pay the fees etc. until they sell the property.

You should consult a lawyer on liens and bankruptcies. Both can sometimes give the Association some leverage if they want to pursue the owners for the debt. That is usually only worth it if you have reason to believe there is something to collect.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Fred,

Old post reactivated to post spam.
The spam has been removed, but the thread is flagged as having the new posting.

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