A property goes into foreclosure and you are on the Board

This might be a useful starting point for you Tim:

http://www.nolo.com/legal-encyclopedia/virginia-hoa-coa-foreclosures.html

Np,

Thank you. That link discusses more about an HOA foreclosing vs. a bank foreclosure. However, the process is similar (based on the article I found on an attorney's website).

Tim,

Since this property is slated for a trustee's sale, I assume that there is a deed of trust and not a mortgage. This is beneficial for your association as the property will not be in limbo for long if the sale takes place as scheduled. Of course, if the sale is cancelled due to the current owner refinancing then they remain liable for the assessments.

You already noted that your worst-case scenario is that the current owner fails to pay assessments in April and May. After the sale, trustee or new owner is liable.

You can follow this along by reading the newspaper. Remember, foreclosure is a public process. You would be able to go to the LEGALS section of your local newspaper to get the sales details. It will be announced there. After that, the new owner process could take some time. Certain states have a "Right to Redemption". Which that time line varies per state. Some states there is no right to redemption. (California I think is one of them).

Here is the rub in that. Typically it's about 6 months to a 1 year the original owner can reclaim the property. They will have to pay what they owed, foreclosure costs, and any improvements the new owner may have done. Which unfortunately, most new owners won't do any repairs during this time period. Due to legal and cost reasons. It's too risky the first year. Example: The new owner puts in a new pool. It cost 5K to install. Realtors/Appraisers say that will raise the sales price of the house $10K. Recouping their investment back. However, during that redemption period, the new owner will get only the 5K back. They won't get the "profit" it could bring. Only the expense they put out.

Tax records will be the best way to find the new owner. They most likely will go register there for the homestead tax. The time period and when records are updated could take several months to reflect the true ownership. It's even more difficult if an LLC buys.

It's a time consuming process overall and takes lots of patience. Your HOA best bet is just to keep assessing their assessments to the property address. If you have a policy of 6 months you lien or 1 year foreclose, then sometime in that time frame letters sent to the HOA address should catch up to someone. Another reason I always say use the HOA address first and foremost as much as possible.

Assuming that this is a deed of trust and not a mortgage, this is why lenders like them. The trustee may hold his own sale without supervision of the courts and without having to deal with the courts' schedules. Things happen quickly under a deed of trust.

Deeds of trust are almost universal in Arizona.

My thanks to everyone who has responded.

Here is some info I have learned:

In Virginia, a trustee sale is used for mortgages. This is done without going though the courts, as the mortgage placed the property as collateral and a a non-judicial foreclosure can be utilized. See Summary of Virginia's Foreclosure Laws

In Virginia, and perhaps other States, Lenders typically assign foreclosure process to another company utilizing an What Is an Appointment of a Substitute Trustee? (article from NC, scroll down to real estate heading)

In Virginia, the trustee must inform every other lien holder of the intent to foreclose (this is why our Association was notified (both directly via the mail and through our registered agent) 30 days in advance. Newspaper advertisement is also required (which I discovered was published today, 4/20). The homeowner is only required a 14 day notice. Therefore, it's possible that the homeowner doesn't even know of the impending sale yet.

In Virginia, the trustee may suspend the sale and restart it without further notice to anyone.

In Virginia, for non-judicial foreclosures, there is no time frame after the sale for the owner to reclaim the home (redemption after sale) or to stop the sale be bringing the mortgage current (reinstate loan prior to sale). See: THE FORECLOSURE PROCESS IN VIRGINIA (from a VA attorney's website).

In this case, the sale is of the first mortgage (it's unknown if there is a second mortgage or other liens). In this case, I know the owner was attempting to refinance but do not know if they were successful or not or if it's still being reviewed. The owners are not military, therefore protections under the SERVICEMEMBERS CIVIL RELIEF ACT are not available to the owners. Based on the amount of the first mortgage listed in the documents, there should be a fair amount of equity within the home (unless there are other liens).

The owners have been fighting to keep their property but it will likely have been too little too late.
Bottom line, it appears very likely that the property will be foreclosed.

Since the owners are current through March 31 (assessments paid monthly), the Board has decided to take a wait and see approach. Likely case, the Association will need to write off two months of assessments. Worst case, the process will be delayed and the Association will have to take steps to perfect our lien prior to the sale.

Again, Thanks to everyone who has contributed to the thread.

I was hoping for more of a learning experience in the process but that would have only occurred if the assessments had not been current and we were in the process of collecting.

Hopefully this thread will help others.