What happens when a bank escrows payments for a homeowner that is delinquent on hoa dues

The collection process was initiated on a homeowner at my condo to recover delinquent hoa dues. The bank that holds the mortgage indicated that they would escrow the account to keep the homeowner current on hoa dues and protect their investment. It seems like putting these payments into escrow would not be a bad choice for the homeowner because it would spread the payments out over a longer period of time vs. having to pay everything at once or face foreclosure. But it seems that the homeowner is not in favor of this solution. Does anyone know the negative implications of this escrow solution for a homeowner that I might be missing.

I t is highly unusual for a servicing company to get involved in a HOA collection process. As Tim pointed out, mortgage loans do get sold and other servicers will take over. Also, if HOA is managed, those relationships change hands. Officers on a Board, if self-managed, also change.

My understanding is that real estate escrows in Connecticut are handled by attorneys, who have direct access to title records. That isn't the case across the country. In my state, Northern California escrows are handled exclusively by title companies, while Southern California escrows are handled by neither title companies or escrow companies.

The homeowner may not like having their dues escrowed, but tough. There is language in the Security Instrument to protect the investor, (bank).

We tried that while I was at Countrywide, setting up an escrow account for HOA dues. Will never happen!

The escrow option for HOA dues is NOT AVAILABLE!

Having wrestled with delinquencies A LOT while I was my Board treasurer, I think escrowing the assessments is a great idea - if more mortgage companies did this, perhaps homeowners would have a more realistic idea on the cost of homeownership and determine if they could really afford it.

The problem our HOA ran into we would pursue a foreclosure after tying everything else to collect and then the mortgage company would swoop in and do their own. The mortgage company has the upper hand because they have the secured interest in the house, and must be paid before it changes hands, and most times there wasn't enough in the selling price to pay us and them, and so our lien would be washed out. We could try to pursue the homeowner because his/her debt with the association remained, but as many of you know, there usually wasn't anything left or the homeowner would declare bankruptcy and we'd still be hosed.

In a few states you have a super lien law which would put the HOA ahead of the mortgage company as far as the liens go - I think it depended on who filed first and HOAs usually got to the courthouse before the mortgage company did. Tax liens of course, trump everything. Perhaps this mortgage company got burned enough times and understand the importance of HOA assessments - depending on what they cover, it can keep the house is somewhat presentable shape and if they go ahead and do their own foreclosure, they might stand a better chance of getting most of their money back.

If this homeowner is delinquent and the bank is willing to step in and pay them, the only thing I would care about as a board member (and homeowner, for that matter) is the HOA getting its assessments so this homeowner pays his/her fair share of expenses. I could care less how he or she ain't happy about a higher monthly payment or a longer mortgage. Maybe next time, he/she will pay assessments in full and on time and avoid this drama!

Nope, I didn't miss that - the only reason I suspect a homeowner wouldn't want the assessments escrowed is it would increase the monthly payment or the length of the loan. It's one thing for a mortgage to go up because of a change in the property tax rate - that may amount to a few dollars as opposed to an increase in assessments which could be another $10 or $20, possibly more. Maybe the homeowner finds his/her budget easier to manage if he/she cuts two checks instead of one.

Another thought - I'm sure the mortgage company would come up with another way to add some sort of fee (likely overpriced) to the mortgage to cover its expense for contacting the association to find out the upcoming year's assessment and adjust the payment accordingly. That could be a reason to object to the assessment being escrowed.

I'm sure money's the main driver for objecting to this, although I suppose a third reason could be if the homeowner has another reason he/she hasn't paid the assessment, like "I'm not getting all the services that the assessments are supposed to pay for" or "The board is too secretive/wasteful with the assessments" and so on.

I've not heard of it being done, but it would seem to me that the main potential advantage to lenders is to not have the HOA foreclose before the bank does. Even that would probably only matter in states where HOAs have super liens.