Financial Crisis/Foreclosures

I wanted to see what everyone here thought on the government bailout. I know this affects us, our community was birthed during the housing boom about 6 years ago and this has been our experience.

All was great the first year. Then property taxes hit and our 3-1 started to take affect. People, including us, were overwhelmed. A mortgage payment that they were approved at of $800.00 suddenly became $1,200 for people. Although we looked at our finances and took the house under the concept "can we afford NOW what our payment will be in three years". We could, others....many others could not. But here is what we saw start to happen...homeowners started to stop paying, by choice. They began to fill their garages and houses with expensive things. They went on a spending binge to live the high life rather than pay their mortgage and try to keep their home. They lived free for years of the monthly mortgage payment. This group makes up a good portion of the foreclosures we have here, then of course we have our other individual situations, financial, death, divorce, bankruptcy.....ect....We were hit hard and I have not done a recent count, but out of our 151 homes we have about 20 homes that went into foreclosure. 90% of those homes obtained by HUD.

The association has moved NOBODY into foreclosure due to non-payment. The association stopped putting liens on homes because past record has shown that we did not recover any owed dues and lost the lien money. It was lose-lose and a choice was made not to throw any more association money into the courts and lawyers. It was now time to get clever because the mortgage companies are working hard to keep people who have not paid their mortgages in years in their homes. This is hard for our BOD because of the reasons stated above. We took 3 of the biggest past due accounts, threatened a lien followed by foreclosure. This method has worked out for one home (lien and then payment plan worked out), the other home is abandoned (has been for years and is held up in a court/divorce thing) and the third we filed lien and are looking to take to foreclosure, but I still do not want to help drive down our values by the BOD putting another home in the hands of HUD and being sold for thousands of dollars less then value. HOWEVER we need our money.

The value of my home has not moved since we bought and houses in it's likeness are being sold by HUD at about $60,000 cheaper. We suck it up, however we, our association, are just now at a point where we can start to make some upgrades to the community and not just maintain our grounds. This should help improve the value of our property.

With the bail out I am perplexed. How is this going to affect my home and finances. I feel they should hold the banks, our builder and those that just fled responsible for this. The homeowners who fled.....they will have clear credit and ability to buy before I regain value in my home. That does not seem right to me.

Looking for all thoughts and experiences with this...............

So let me throw this out there. According to our Auditor's appraisal we have about 30,000$ of equity in our home. We could not sell our home at the Auditors appraised price, when some look to refinance at the Auditors appraised price they are told they cannot refinance at all as they owe more on their home according to their appraisal then the home is worth.

We can get our private appraisal, submit it to the auditor and lower their appraised value....therefore pay smaller property taxes. Is that a wise thing to do in this market? Wouldn't lowering that just help decrease the communities overall value? We can't sell so is there any harm done?

I am thinking about doing this because our city got greedy during the housing boom as well. We had lots of land and it was zoned for houses. So much to the point that that the seller could not compete with all the new houses popping up. Well, this created a problem in our school district. TOO MANY KIDS! New schools were passed to be built during a levy 2 years ago. Raised my property taxes. Now schools need more money because they cannot afford to put in the new schools the appropriate staff. Kids are in trailers - lol - seriously, learning History. Another levy is being put (even though it was voted down during primaries) on the ballet. We are being threatened of losing busing, Special Ed Teachers, sports, blah blah blah........if the levy does not pass.

I feel this is because of the cities GREED! IF they were going to allow zoning for all these homes how come nobody thought of how this was going to overwhelm the school system? So the Responsible Homeowner is looking to foot the bill or at threat of our school system going under.

You have irresponsible banks, builders, homeowners, city............so why do I need to be responsible? I could save hundreds of dollars a year by lowering the value of my home with the auditor through a private appraisal vs. facing my mortgage payment escalating once again.

Tamara, while I can understand your not wanting to cost anybody their home, I believe that not liening and foreclosing sends the wrong message entirely. People talk and the more people that find out that there are no consequences for non-payment the more people will opt out as the financial climate tightens. We use an attorney who specializes in collections who collects his fees directly from the H/O for his fees.

The documnets may not give the board the option of playing with the procedures. for once, that's when the word "may" is valuable in verbiage for collecting overdue assessments. Considering the special circumstances of today, some leeway may be considered, but when all is said and done SOMEONE is going to pay the piper

Hey . . . . paying the piper . . . that's what this BIG fiasco is all about. And don't belive that it's ALL about the housing industry. There are things we are not being told, and "loans" bought up by agencies and banks now being bailed out are not just from the housing industry debaucle. This is an international implosion.

Kirk, many documents I have researched also make the unpaid assessments a personal obligation of the owner, so suit can be brought in small claims court or a county/superior court. So even if the home is foreclosed, a scofflaw can still be taken to court. The only way it can be discharged is through bankruptcy.

The problem is that liens cost money to file, and they take a lot of expensive lawyer time. So Tamara's position (and mine too) that it is uneconomical to file liens except in the most serious cases is a sensible, reasonable approach.

We recommend filing liens - in Colorado it is a simple process which we do for $50. We STRONGLY recomment NOT using an attorney for collections. The argument that the HOA does not pay for collections is deceiving; there can ultimately be a significant cost to the HOA when a property must be foreclosed. Anyone in arreas does not need the significant additional cost to them and if the delinquent account ultimately leads to foreclosure the HOA will lose.

We recommend trying to workout a payment plan for delinquent accounts when necessary. We recommend using an attorney only when it is necessary to foreclose, after first encouraging the mortgage company to initiate foreclosure.

Dwight said it best............"These people should be granted long-term residence with nice gray bars, but the bankruptcy and fraud judges will eventually deal with them and take them off the Board's hands. "

I think it's a true shame that all those greedy consumers held loaded guns to the heads of all those naive mortgage co and banking professionals for them to give them increased credit lines and upside-down loans. They were only trying to help!

I think we need to give those CEOs and investment bankers every dime we can print to stave off the Post Traumatic Stress that will set in from them having to deal with those tricky consumers who took advantage of them. All that bad paper they were trying to sell and resell and resell? . . . they were just trying to make sure they had lunch money, they didn't mean to flood the world markets with wallpaper.

I think we should remove even more regulations on the financial industries and institutions so they can rebuild even more and continue to take care of their families and all of their own multiple homes and off-shore tax shelters to make sure they don't collapse and have to actually work for a living.

After all, the more real money THEY have, the better off WE are. . . .trickle down and all that. . . .

LOVE IT ALL! You guys are funny!

Typical politicians looking out for themselves with the results of the vote today. They better do the bailout and hold their noses doing it or the shat is gonna hit the fan. The little guy on the street may see it as a bailout of wallstreet...until it costs him his job, his retirement savings, etc etc...and rest assured IT WILL. IF they can't get it done.

It's all about GREED. Buyers want the biggest houses, agents want the biggest commissions, the banks want the biggest mortgages, the stockholders want the biggest profits, and wall street wants the biggest gains. The only thing that is not the bigest, is the poor guys on the street who now have to bail all of the biggies out. Makes me really, really mad to the point of wanting to fire everyone--especially the Washington bunch who won't feel any of the pain--ALL OF THEM

Guess you all haven't heard that it was the Clinton Administration that REQUIRED the mortgage cos to give loans to low-income people whether they qualified or not. Enter the ARM loan! The goal was to make it possible for anyone and eveyone to own a home -- whether they could afford it or not! We have Bill to thank for this whole mess but I'm sure George will get the blame!

Now all the talk is about bailing out the lenders. Well, I say who's going to bail out all of us who are losing big time in the stock market? My husband's hair is getting grayer by the day. Is Uncle Sam going to step in and pay back our losses -- losses created by these greedy lenders? Even if their companys go under their golden parachutes always seem to stay afloat.

Hello everyone,

This subject/thread has been especially interesting.

For information regarding the changes to lending rules for mortgages, please see:
Community Reinvestment Act. It was signed into law by Pres. Carter in 1977. In 1995, changes to the Act were made by Pres. Clinton. Google the Act and you will find an array of links providing an array of opinions and facts; read the Act itself and changes to it, and decide for yourself as to whether the lending institutions were “required” to provide subprime loans.

In my opinion, whether the lending institutions were “required” or whether they were “encouraged” to make subprime mortgages available, the result is the same with regard to the financial crisis we are now experiencing. My hope is that the crisis can be dealt with, and, those responsible for it be held accountable.

Going back to Tamara’s original question: “I wanted to see what everyone here thought on the government bailout“

I originally was against a “government bailout” bill, but now support the concept of a "rescue plan", and am awaiting the new version of the Bill that Congress comes up with. I have been doing plenty of reading and listening to the “talking heads” on this. One source I have read and listened to is Ric Edelman (a financial advisor) at – he has two reports, fyi:
http://www.ricedelman.com/cs/home

As to effects in my HOA – we have seen an increase in delinquencies and foreclosures. We are dealing with it by cutting back on expenses (reduced landscaping replacements, looking into alternative landscaping and snow removal firms, etc.). Last winter we exceeded our snow removal budget and I am hoping for less snow this year – especially as the cost of salt has more than doubled. We have had a stringent collection policy for many years. Our proposed budget will be sent to the HOs soon, and will be interested in their feedback to it (we provide 30 days for comments and is on agenda at Nov. board meeting for comment).

Bonnie

Yes, his admin pushed a bill through Congress that required mortgage co's to give loans to low-income people regardless of whether they qualified or not.

It's incredibly simplistic (and I have to admit, to me, anyway, somewhat offensive) to lay this at the feet of the minority housing law.

I prefer to look at a broader picture:

Gramm-Leach-Bliley Financial Services Modernization Act of 1999 http://banking.senate.gov/conf/

credit default swaps http://topics.nytimes.com/top/reference/timestopics/subjects/c/credit_default_swaps/index.html?inline=nyt-classifier

hedge funds

the Commodity Futures Modernization Act of 2000 http://www.cjr.org/the_audit/post_140.php?page=all

Alan Greenspan http://www.newsweek.com/id/159346

Phil and Wendy Gramm http://www.motherjones.com/news/feature/2008/07/foreclosure-phil.html

I think the Community Reinvestment Act (CRA) is an easy target, but it's misplaced.

For every "expert" who wants to trot this out as a foundational contributor to the Wall Street problem, there are as many who will dispute that.

Janet L. Yellen, President and CEO, Federal Reserve Bank of San Francisco, made the following case in a March 31 speech:

"There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households. We should not view the current foreclosure trends as justification to abandon the goal of expanding access to credit among low-income households, since access to credit, and the subsequent ability to buy a home, remains one of the most important mechanisms we have to help low-income families build wealth over the long term."

http://www.frbsf.org/news/speeches/2008/0331.html

Certainly it's popular for the anti-regulation crew to use the CRA as a wedge issue and try to pile on with it, but here's another specialist in banking and finance law who flatly rejects claims that the CRA was any significant factor in the current crisis. University of Michigan Law Professor Michael Barr said the "CRA was enacted more than 30 years ago. It would be quite odd if this 30-year old law suddenly caused an explosion in bad subprime loans from 2002-2007....Subprime mortgages were mostly made by mortgage brokers and lenders and securitized by investment banks -- institutions not covered by CRA. CRA only covers banks and thrifts, and these institutions mostly have not suffered to the same extent or kind from bad lending as the non-CRA-covered institutions at the core of the current crisis. The problem here is not CRA. It is what the late former Fed Governor Ned Gramlich called 'the giant hole in the supervisory safety net' -- bad lending by firms outside the banking sector's rules for prudential supervision, capital requirements, consumer protection and yes, the CRA."

That is in it's entirety irresponsible. Now this is qualified financially or credit worthiness? Or both.....I know when we applied for financing I found a surprising 15,000$ loan on my credit that was not mine. I had to have that removed from my credit before they approved me for the home. Other than that we had good credit and in all reality should of bought our dream home then. We just did not have money down due to the relocation and thought investing in this home would help us get to our dream home faster........lolololololol..hahahahaha.....we lost that gamble.

Don, you have raised one of the most interesting and challenging questions yet. I hope people with be equally thoughtful in response. Let me address my thinking in a general way, apart from consideration of Florida law which may apply. (Florida may have laws that deal with this situation specifically.)

For the most parts, covenants specify that banks and holders of foreclosed properties are exempt from paying association fees. Interestingly however, they have to pay taxes in most cases.

This is a serious issue for homeowners associations that has not been thoroughly considered. There is a big hole in the law. Most state laws and covenant declarations assume that the association exists in perpetuity and as an ongoing entity. Few have thought about a situation where a substantial portion of the units are foreclosed or in arrears.

There are a couple of avenues to explore. First, the association itself could declare bankruptcy and force a dissolution. Or a member could force the association into bankruptcy. That would throw the issue into federal court with a completely different set of rules. A trustee/receiver would be appointed and it may be possible for a federal bankruptcy judge to invalidate the covenants, forcing the holders of foreclosed units to pay maintenance fees. There would be other consequences as well for unit owners.

Second, (most interesting to me) is a forced sale to a profit-making corporation. Check out this New York Times article of September 26th, following up on an earlier thread from September 18th, "And you think you have problems . . ." about forced sales.
http://www.nytimes.com/2008/09/28/realestate/28wczo.html?em

"A private company has acquired 98 of the 120 units in the building, and it has tapped a little-known clause in the state’s condominium law that allows it, as majority owner, to terminate the Parker Place condominium association and make the building a rental property.

Also, consider the possibility of selling the association itself to a profit making company, keeping the condo organization intact. In many states there is nothing in the law that specifies (1) a homeowners association must be a not-for-profit entity and (2) it must be owned by the unit owners. The best example is the development period during which the association is owned and controlled by the developer. Has this happened? Yes it has. Right here in Hoosierland we have a condo association that went bankrupt and was purchased by a profit making stock corporation.

I have a great deal of sympathy for the predicament you and many other unit owners are now finding themselves in. While we like to think of the benefits of living in a covenant community, there are risks attached to those benefits that we do not consider. And in economic conditions like the present, we are forced to pay the piper.

Thanks for your reply. I do have a question about the bankruptcy option. First, let me say that I am no lawyer, but it is my understanding that in order to declare bankruptcy you must have debt. Most of these HOA's do not seem to have debt, they just can't pay for the previous services, due to declining income. They then either cut back on their services and/or raise the fee. Would it better for them to assume debt and go into bankruptcy? I don't know. What I don't understand is this. I owned a mobile home in a rental park for several years. When the lot rent was not paid for six months, the park began proceeding to assume the ownership of that home. It seemed to take only 2-3 months for that to happen. I was not involved in any of this, but that seemed to be the timeline. My question is this, why can't the HOA take over units that are not paying fees? The particular unit I'm interested in has not paid fees in two years. The previous owner did not pay for a year and Countrywide has not paid. I am not sure exactly how long Countrywide has held the title. Why couldn't the HOA take the unit, rather than just place a lien (which will only be paid when sold)?

I know that our covenants don't address bank owned properties. The only place it is touches is that the HOA is secondary to the primary mortgage. Thus if foreclosed, unless the primary mortgage is settled with money left over we would get nothing from previously owed dues. But the next time dues are owed, the bank is on the hook for said dues.

From what I have read there are HOAs in Nevada that have been able to collect dues and force banks to maintain properties. They essentially treat the bank as any other owner. If the bank fails to pay the dues, they file a lien. They also fine and if need be file suit for failure to maintain properties.

Could you please explain what exactly do you guys mean by a HOA "foreclosing" for unpaid dues ???

An HOA has the same foreclosure power as a mortgage. If you don't pay your mortgage the mortgage co. can foreclose. If you don't pay your HOA assessments, the HOA can foreclose. It's as simple as that!