Foreclosure ? for MelissaP1

We have a home, that according to all the Maryland public records, was paid off in 2007. Now, based on my 'simple math' not including late fees, this is right around the time that this owner stopped paying their dues. Out of all the delinquent accounts, they owe the most...by A LOT. And our management company keeps telling us that we shouldn't foreclose because it is expensive. But this person hasn't paid their dues in at least 5 years and prior to that (again public record) has had liens placed against the home at least 5 times in the 20 years they have lived here. They cleared those liens in order to pay of the mortgage, but I don't think they have any intention of paying us now that the home is owned.

My question is...if the home is paid off, should we persue the foreclosure to try and collect $4,000 in back dues plus all attorney costs? Even with the market the way it is, we should be able to get that amount at auction, right?

Sorry, I know you were looking for input from Melissa.

An HOA could not ask for better than a home without a mortgage lien hindering collection efforts. If I were in your place I would start foreclosure in a heartbeat. The owners are not going to let the HOA take their paid-off home from them, so the most likely outcome will be that they will pay off the past assessments once they get served with the notice of foreclosure. They will, of course, pay not only the past due assessments but thousands more legal fees.

By paying off their mortgage in full and having no superior lien on their home, the owners have given the HOA a clear and unimpeded path to recovering the past due assessments.

Typically the governing documents include charges, fees, interest and costs of collection as part of the responsibility of the member if the member fails to pay assessments on time. Check your governing documents to see what they allow.

We placed into our documents the following definition for "costs of collection:"

“Costs of Collection” shall include, but shall not be limited to, administrative charges; notice charges; process service charges; legal fees; release fees; copy charges; postage and mailing charges; return check charges or any charge incurred by the association or its agents, contractors, or management in the collection of a lien, any assessment, as authorized in any judgment, by foreclosure or judgment action, regardless of whether the dispute is settled by agreement or by legal action.

From what I understand from their neighbors, they were trying to sell in 2005, at the peak of the 'bubble' so they paid of the liens and then after a year on the market with no hits, paid off the mortgage. Then the market tanked. The Land Records here are pretty up to date, I would hope a refi wouldn't take 5+ years to get recorded, but this is a risk we will have to take I guess. I know we have 5 homes that have been foreclosed on by banks 2 or more years ago, are vacant and for sale and those records still list the original owner in the land records, so nothing is guaranteed!

I should have clarified that the time lapse to record a new mortgage would typically be a matter of days or weeks. In my state I believe that they have 60 days to record it.

My thought was that your association might have learned of the payoff of the first mortgage right after it happened in 2007, looked at the records, and then assumed that there was no new mortgage because it had not yet been recorded. Since you have looked the records since then, that was not the case and it did not occur to me that if they were putting the home on the market that they would voluntarily pay off the liens.

Sorry did not respond sooner, just got off work. Foreclosure is not that expensive unless you HOa is nearly broke. Ours was but the amount owed helped pay for another project. It cost about $800. However, amounts vary and depends on the lawyer situation. My advice is to NOT involve your MC in this decision at all if you are owner ran. They have no business except to write the check in my opinion. This is a HOA matter. The board needs to decide and approve taking on this foreclosure.

the HOA does NOT want to own this home. My advice is to make arrangements to find people to show up at the auction if it makes it that far. This is NOT illegal or a conflict of interest. A foreclosure or lien is PUBLIC knowledge as long as you know where to look. Which is in your local newspaper in the LEGALS section of the classifieds. They run different times of the week. This is part of the foreclosure process since the foreclosure notice has to be ran in a Public source. That is also part of the expense of the foreclosure. Ad space is part of the charges if any.

Keep in mind this one thing: A foreclosure STOPS when the amount owed is paid off by the owner. Even if they show up at the auction they can stop it. Some states allow for "Right of redemption" up to a year after the sale. They have to pay for all their amount owed PLUS any improvements made.

I would start the process soon. It can take about 6 months to process. Send certified letters even if they refuse it. Send it to their HOA resident address. The amount owed should contain the following items: back dues owed, late charges, any unpaid special assessments in time period, legal expenses of filing, lawyer, certified letters, newspaper ad (Lawyer does) and INTEREST. Your HOA can charge interest on all of this at a set amount. Your docs may have it written in it. Ours was 6%. However, the state may have a set max amount. No loan sharking amounts here.

Be prepared and keep a calender of events just for this issue. This will help. Use your lawyer like a tool to get this done. A lawyer does need to represent the HOA in court. Your HOA is in charge NOT you MC. A MC is a contractor to the HOA. They suggest a lawyer if they want but don't not shop around. Check into legal services which save money.

You are ONLY stopping your HOA's bleeding and NOT making a profit. Remember your starting from a hole and trying to backfill. The goal is to get the money owed and send a message. Again I repeat the HOa does NOT want this house just to force them to pay up finally.

My guess is that the owners will pay up when they are served with a summons and complaint rather than losing a paid-off home to foreclosure.

If it did happen to go to foreclosure, however, there are basically two possible outcomes, each with its plusses and minuses.

If the home sells at the foreclosure auction, the HOA gets the money it is owed and the owner gets any excess bid amounts. Because the auction is public, the HOA cannot control who bids, so the home could end up in the hands of an investor whose sole interest is renting the house for a profit. He could turn out to be a really bad neighbor.

If the home does not sell at auction, the HOA ends up with the home. This means that the association gets no assessments and has to pay upkeep and taxes until it can sell the home. The good news is that the association can list the home for sale on the local MLS at market value. Not only could the association make a tidy sum for its coffers, but it can also control who buys the home to ensure that it will continue to be owner-occupied.