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Nonjudicial foreclosure

Started by TerriS6 • 9 replies • 364 views

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TerriS6 (California)
Posts: 3,284
Posted:
Our board has recorded assessment liens but never actually foreclosed until now when it has hired a collection agency to do that - although none of its liens are valid. But if they were valid, how does it work when there is a mortgage? What happens to the proceeds? Thank you.
ElleN (Idaho)
Posts: 4,420
Posted:
For starters, I see that California law requires that //excess// proceeds (from a foreclosure, and in excess of the amount owed on the mortgage and to the HOA et cetera) are to be remitted to the most recent owner.

I assume that this was not the law in Minnesota. Hence a dispute over this reached the Supreme Court, per your recent thread citing the Court's opinion.
MaxB4
Posts: 3,513
Posted:
When the HOA forecloses, it is ONLY foreclosing on its recorded lien, not that of anyone else. The mortgage company still has their Deed of Trust giving them the power to foreclose on their lien(s), which will be far greater than those of the HOA. If there are no buyers at the court steps, then the HOA now owns the lien and must make payments back to the HOA for the monthly dues. If the owner is current on their mortgage and tax liens, then the HOA has a serious problem.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
My experience is when one ends up going to foreclosure they are typically deep in debt that quite often there is not enough money from the sale to pay off all debtors including the HOA. I know of one HOA that paid about $3,000.00 to foreclose on a unit owing the HOA $4,000. In the end the HOA did not get a penny and were out $6,000.00.
KellyM3 (North Carolina)
Posts: 2,239
Posted:
Quote:
Posted By JohnC46 on 05/26/2023 11:05 AM
My experience is when one ends up going to foreclosure they are typically deep in debt that quite often there is not enough money from the sale to pay off all debtors including the HOA. I know of one HOA that paid about $3,000.00 to foreclose on a unit owing the HOA $4,000. In the end the HOA did not get a penny and were out $6,000.00.

I agree with this. However, the HOA account linked to the property will never be restored without collections actions. It's nasty all the way around and inefficient.

Here's what will happen:

1. HOA forecloses
2. House goes to auction where the HOA will likely "win" and take the deed
3. The mortgage company will demand payment-in-full
4. The HOA won't pay
5. The mortgage company pursues foreclosure of its lien, and wins (or HOA gives the deed back to the mortgage company, if legal)
6. Mortgage company is expected to pay HOA fees pending resale.
7. The property will eventually sell.

The HOA won't collect on past dues because the auction will award them the property unless another buyer steps in and pays, which will cover the HOA's past dues.

Fun stuff.
TerriS6 (California)
Posts: 3,284
Posted:
How about this one?
1. Board records invalid assessment lien that's challenged in court.
2. Fearing a loss, the board instructs its collection agency to file a duplicate lien in their name which they do, making association beneficiary and adding $1,000. in costs including 3 fees for lien releases that were never recorded.
3. Owner defaults on reverse mortgage, there is an auction with no bidders, and HUD buys back the property.
4. The deed shows notice sent to the association.
5. Court orders board to release invalid lien which it does.
6. Property now for sale by HUD
7. What happens to collection agency's duplicate lien?
MikeB23 (Louisiana)
Posts: 109
Posted:
Our experience is that we have an owner who refuses to pay dues or other assessments. We file lien, then sue. The bank holding the mortgage pays the amount of the lien and we start the process all over again.

Doing a lien search on this guy revealed he had a loooooong list of liens including from the IRS. I guess the bank figures it will be out more money foreclosing on him than it does by paying his dues. This last suit was for in excess of $5,000.00. I guess the bank just adds it to his mortgage, don't really know but as long as we get our money, lawyer fees, and court costs covered there is not much else we can do.

Our Board includes two lawyers. Small town, where everyone knows everyone else.
WendyM5 (North Carolina)
Posts: 1,522
Posted:
Quote:
Posted By MikeB23 on 05/28/2023 5:27 PM
Our experience is that we have an owner who refuses to pay dues or other assessments. We file lien, then sue. The bank holding the mortgage pays the amount of the lien and we start the process all over again.

Doing a lien search on this guy revealed he had a loooooong list of liens including from the IRS. I guess the bank figures it will be out more money foreclosing on him than it does by paying his dues. This last suit was for in excess of $5,000.00. I guess the bank just adds it to his mortgage, don't really know but as long as we get our money, lawyer fees, and court costs covered there is not much else we can do.

Our Board includes two lawyers. Small town, where everyone knows everyone else.

I'ver never heard of this technique before. So you sue in small claims court, but how do you collect on that? why does the mortgage holder/bank pay you the lawsuit fees if they are not the party to the law suit???
vis ta vie
MikeB23 (Louisiana)
Posts: 109
Posted:
No small claims court in Louisiana. We sue in district court. We then call the bank chief loan officer and the bank sends us the money for the amount of the lien. We remove the lien, but the suit is still active because owner hasn't supplied required proof of insurance. Bank has no interest in if the guy has liability insurance, just personal insurance for contents of the unit.

The board expects this to continue until he dies. The two lawyers on our board have researched and were unable to find a suitable solution other than continue the current unending process.
MikeB23 (Louisiana)
Posts: 109
Posted:
No small claims court in Louisiana. We sue in district court. We then call the bank chief loan officer and the bank sends us the money for the amount of the lien. We remove the lien, but the suit is still active because owner hasn't supplied required proof of insurance. Bank has no interest in if the guy has liability insurance, just personal insurance for contents of the unit.

The board expects this to continue until he dies. The two lawyers on our board have researched and were unable to find a suitable solution other than continue the current unending process.

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