Mortgage Lender Paid Assessments/Legal Fees – But More Legal Fees Keep Appearing

Started by ArthurS7 • 12 replies • 140 views

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ArthurS7 (Pennsylvania)
Posts: 32

Posted:

We have a situation where the mortgage lender paid off a delinquent homeowner’s assessments and legal fees, but new legal fees are now being added—and the homeowner still isn’t paying. I’m looking for advice on how to prevent this spiral of legal fees, which could hurt our credibility.

BACKGROUND:
A homeowner who moved in August 2023 never paid any assessments. We obtained a court judgment (by default, as she didn’t appear), and our attorney contacted the mortgage company. Within a week of providing a payoff statement (~$6,000 total, including ~$3,000 for the judgment), the mortgage company paid it in full on April 2, 2025.

CURRENT ISSUE
A month later (yesterday), the attorney and property manager said we need to extend the judgment because there’s now a $1,600 balance. This includes:

A missed April assessment plus a $205 late fee.

$922 in new legal fees billed after the payoff.

I haven’t gotten a clear answer on why this doesn’t reconcile. We haven’t heard anything from the homeowner, and we don’t know what actions (if any) the mortgage company has taken with her.

CONCERN/QUESTIONS:

Every time we ask, new legal fees seem to appear. I’m worried this could undermine our standing with the mortgage company if they perceive it as never-ending.

Should I ask the property manager (who doesn’t bill by the hour) to contact the mortgage company directly? We have the contact’s email from prior correspondence.

Does anyone have insight into what the mortgage company might be doing with the homeowner at this stage?

ArthurS7 (Pennsylvania)
Posts: 32

Posted:

I'm sorry, it's NOT a $205 late fee for April, it's $205 balance that includes assessment and late fee

DeanJ
Posts: 1,786

Posted:

Believe it or not, there are people who buy houses and never make a single mortgage payment and remain in the home for a lot longer than anyone can imagine.

Your issue is between the HOA and the owner. I would continue allowing your attorney represent the HOA 100% for this issue.

SheliaH (Indiana)
Posts: 6,964

Posted:

As Dean noted, you should start with talking to the mortgage company and your attorney. There are several questions that someone needs to answer:

Who billed the legal expenses? If it was the HOA attorney, you need an itemized statement listing what was provided - and I'd ask why you didn't get the heads up that it was coming. The HOA may have to pay it and then start talking about the most cost effective way to protect the association's interests going forward.

Who owns the house now? Whoever was listed on the deed in April should be responsible. If it's the homeowner, you can still go after her, but frankly I wouldn't expect getting your money. The mortgage company had to pay $6k which she apparently didn't have. I assume you had a lien on the house for the $6k and that's how you got your money.

(Which is a nice change from when I was board treasurer during the 2008 housing meltdown. We filed lots of liens but most of the time we got little or nothing - see below for the primary reason).

Another reason the owner question is important is because the mortgage company coulook d be trying to sell to sell the house to pay off the loan. If the sale price is enough to pay them and the HOA's remaining assessments, great, but it's likely they'll take what they can get because they have to be paid before the house changes hands. To be blunt, they don't usually care if the HOA gets anything.

As for your standing with the mortgage company, I wouldn't worry about that unless the HOA owns the house. Otherwise this is really between the homeowner and mortgage company because she's the one who took out the loan in the first place. I'd be more worried about property taxes that may have gone unpaid because that trumps the association and mortgage company liens, and must be paid first. Have your attorney check on that.

In the end, you may want to put another lien on the house for unpaid assessments for the rest if the year, attorney fees and late fees. Hopefully you get it back when the house sells, but be prepared to write off some or all of it. The new owner will be responsible for assessments from the date he or she takes ownership.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

ArthurS7 (Pennsylvania)
Posts: 32

Posted:

Thanks for all the input. To clarify

- the homeowner still owns the home, mortgage is being paid, and property taxes are being paid by them. The only thing not being paid are the HOA assessments.

- The legal fees are from the HOA attorney, who I believe, bills at the end of each month. Since the mortgage company asked for the payoff statement on March 25, and it was given right away, it didn't include the March legal fees.

TimB4 (Tennessee)
Posts: 21,059

Posted:

In situations like this, I'd start foreclosure to let them know the HOA means business.

I doubt you will have to actually foreclose.
If everything else is being paid, I expect they will pay to stop foreclosure.

In my last association we had one member who would wait until legal action was taken to pay.
Action would be taken, they would pay and we start the dance over again.

One suggestion, adopt a resolution and publish to the membership that the Assessment is annual. Members may pay monthly but the Association reserves the right to accelerate payments (which is what you do when you take legal action). This way, you settle for the year and get a little bit of a break between dances.

ArthurS7 (Pennsylvania)
Posts: 32

Posted:

Thanks for this suggestion. So the attorney's letter to the mortgage lender said we would foreclose -- and 7 days later, we had the check.

Our documents do allow that if a person misses payment like this, we can accelerate and add it to the balance. I think though for this house, it was at the end of the year so there was nothing.

On the other hand, if she's not paying now, again, we can accelerate it now and add it.

And you know, about those amounts not reconciling, that might be it. Let me do some math - no that's not it. But that should be added.

Hopefully the property manager will get back to me on Monday on reconciling the amounts and then we accelerate the payments. In that case, I feel a little better about going back to the lender eventually, because they still haven't started making payments and don't feel like we are losing credibility.

I just wish I knew what the lender told the homeowner.

We have a second house, next door to that one, sister of the other one, who also never paid. She's got a higher balance. She did show up to court and her attorney told our attorney he knew they had no case (she claimed she never got the notice -- we charged no late fees in 2023 because we changed property management companies, sent letters, certified, and phone calls, and these 2 out of 96 are the only ones that didn't pay). At the end of the court, in the hallway, she screamed a ton of profanities at our property manager and said she'd never pay. For that house, we contacted the mortgage company a second time and they asked if she had paid. So not sure what is happening there.

DeanJ
Posts: 1,786

Posted:

I have heard of situations where the both the taxes and the HOA fees are included in the escrow. Which would explain why the owner is largely ignoring this issue.

If the mortgage company failed to pay the assessments on time, the mortgage company is responsible for any late charges and attorney fees.

SheliaH (Indiana)
Posts: 6,964

Posted:

Looks like you may need to foreclose on the second house as well. Don't worry about what the company told the homeowner- if they'd come up with an agreement to include assessments in the mortgage, you'd be getting those payments. Her obligation to pay assessments is between her and the HOA, so she needs to figure out how to do that in full and on time.

The mortgage company likely has language in the contract stating the homeowner cannot do anything that would result in a lien being filed against the house as long as the mortgage is active. Years ago, HOAs were cussing and fussing to compel the companies to enforce those clauses by paying the HOA to get rid of that lien and adding it to the amount owed.

It doesn't sound like your board is keeping up with what the association attorney is doing and that has to stop right now. When we send an account to our attorney, it includes the accelerated fees, returned check charges, if applicable, and a fee our property manager charges the HOA to monitor the account and bed out nastygrams before it's turned over to the attorney. After that any contact between the homeowner, his/her attorney, mortgage company and whoever else is interested flows through the attorney.

The attorney makes a recommendation on how to proceed and the board makes a decision. The recommendation also includes the initial cost. Our attorney also has a client online portal, where the president, treasurer and property manager can check and see what's happening with the delinquent accounts in real time.

A recommendation on what may need to happen next is in our management report which we discuss during meetings.
At the start of the year, I'd meet with the attorney to discuss our progress to decide what might happen loo en and our best chances to get the money or if it was time to consider a write off.

Those are some of the things your board might consider, because you can't afford to sit and wonder about this stuff and you need to know exactly what it's costing the association. There is a thing called throwing good money after bad and if you must give up, you need to know why.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

ArthurS7 (Pennsylvania)
Posts: 32

Posted:

We get a monthly report from the attorney that lists all the activities on any delinquencies. In the 10 years the community has existed, 96 homes, these are the first two to ever go to the attorney. The attorney charges a flat fee for Stage 1 (contacting homeowner), and then a flat fee for Stage 2 (taking it to court). While our property manager denies it, what I saw in the contract with the attorney is that after they get a certified copy of the judgement, they go back to charging hourly, which is why I think the legal fees are adding up. Our property manager gets nothing for delinquencies - it's part of their monthly fee.

Our attorney (at our cost) had done an asset search for both homes and identified checking accounts. They had recommended that if the mortgage company wasn't responsive, we could do a writ of execution on the checking accounts or personal property, before we consider foreclosing. We have no amenities and our state does not allow garnishing of wages. The second house has a nice luxury car sitting outside (back when she was in court she claimed she couldn't pay HOA before she was too busy working). So based on what the attorney resolves with their mortgage provider, we may go for that next.

We do not believe their mortgage provider has escrowed this at all, so they are off the hook on this one.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Our attorney would give a monthly report.
Often nothing changed.
However, they were able to charge us for the update.

We informed them not to give us a monthly report and only inform us when something changes (court date, lien filed, etc.).

This saved a lot of legal expenses for us.

SheliaH (Indiana)
Posts: 6,964

Posted:

One of the reasons we went with our current attorney was that they were more effective than the other (his family owned a collection agency, so he was already well versed in dropping the hammer when necessary) and they had the online portal, which saved us lots of time and money in phone calls, faxes and emails. Our property manager would note the most recent changes on various accounts for the management report and since she had access to the portal, we didn't have to worry about monthly charges. We pay the firm an annual retainer and get a certain number of hours where we can call, email or fax questions, but contacting the attorney is always discussed first so we don't use up the hours within 2 weeks or less.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

SheliaH (Indiana)
Posts: 6,964

Posted:

However the situation with these houses end, it's time to have a chat with the attorney about his/her fee schedule. Ours gives us an itemized list of all services and also bundles certain things, depending on what's needed - for example, if we learn the homeowner has declared bankruptcy, the attorney has to file a proof of claim with the court, monitor those proceedings (although we know the paralegal or law clerk does this stuff), makes appearances on the association's behalf and does some research on assets, whether there are tax liens, employment, etc. By having the itemized list yourselves, you know exactly what you're getting for your money and might be able to negotiate some things if the attorney is really interested in keeping your business.

We've also used the average cost of legal action to educate homeowners on how much shit they can get in if they don't pay in full and on time - when they see how quickly the bills add up, they're more likely to talk to the attorney about a payment plan (which must be approved by the board and its decision is final). If they've had a good payment history, it's easier to do because a slow nickel is better than a fast time in some cases.

Fortunately, we can garnish wages in this state - garnishing rental fees is doable, but more complicated since the tenant has to sign paperwork indicating he/she will send the rent payments to the court instead of the landlord. Some tenants will cooperate (usually because they're pissed at the landlord for some reason) while others are just as foul of the landlord and don't hesistate to tell everyone to go play in traffic.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

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