Unresponsive Banks

Started by GregB5 • 12 replies • 1478 views

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GregB5 (Maryland)
Posts: 5

Posted:

All of the unit owners in our association have signed the personal consents required to amend our declaration to specify a limit on rentals. The law requires that the bank holding a mortgage on any unit also sign a consent to the amendment: good faith efforts by some of our owners to secure their bank consents- from major national banks- have resulted in stonewalling and unanswered phone calls that go on for months. Is there any way to resolve this siuation? This amendment is crucial to the financial health of our HOA.

Thanks,

Greg

RogerB (Colorado)
Posts: 5,067

Posted:

Greg, you stated "The law requires that the bank holding a mortgage on any unit also sign a consent to the amendment".

If you are referring to your Declaration requiring the approval of the mortgage companies good luck. They usually do not respond. Some HOAs have Decs which require approval of only those mortgage companies who are an "eligible mortgage holder" which is defined as any party with an ownership interest who maintains their mailing address with the HOA. And if none do this the problem you stated is resolved.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Greg, You will be lucky to get any bank to sign any HOA amendment papers. They don't care about any HOA problems except to get their money back. I have wondered for years why that clause has been handed down over the years. I understand what it means but I do not have a clue why it is in documents because as I said, the lenders don't even have a system of who receives any amendment proposals and who would sign it. Gads, they cannot even take care of themselves, much less worry about what goes on in a HOA where they hold a note.

IMPORTANT!!! As long as you are making or trying to amend your documents, REMOVE THE LENDER CONSENT from the CC&Rs.

GlenL (Ohio)
Posts: 5,491

Posted:

Donna from what I have been told that is in the CC&R's because:

A. The bank actually owns the property until the mortgager pays it off.

B. The loan contract was written accepting the CC&R's as they were in place at the time the mortgage was written. A change in the CC&R's affects the mortgage contract.

Our documents also require the mortgage holder to sign off. If they don't, the change in the CC&R's is not valid on that unit until it is sold or the owner gets a new mortgage.

Studies show that 5 out of 4 people have problems with fractions

DonnaS (Tennessee)
Posts: 5,671

Posted:

Glen,

Unfortunately, you are right about how this is stated. My sets of documents have the exact same wording on the mortgage holder. I think that this needs to be addressed again, maybe between the lawyer writting these documents and banks. The times have changed so drasticaly with mortgage companies and banks, I wonder if they would be on board to change this statement and requirement. They sure as heck have seldom cared what goes on within the HOAs as for amendment changes. It sounds like we have another mission to accomplish with outdated document changes to be addressed.

DarylF (Washington)
Posts: 157

Posted:

We have this same issue. Our CC&Rs state and CC&R changes have to be approved by 75% of the banks.

Could we send the letter certified and state "no reply after 60 days is assumed agreement" or something to that effect? Does that hold up in court?

If not, is it just not possible to change our CC&Rs? Or is there another way?

GregB5 (Maryland)
Posts: 5

Posted:

We are trying to amend our Declaration to restrict rentals, and that requires 100% consent by unit owners and mortgagees. The unit owner consents, but the bank is completely unresponsive- even on a matter which is in its own best interest.

We're considering having our lawyer send the request certified mail, in the unit owner's name, with a copy to the bank legal department and CEO.

EverettC (Maryland)
Posts: 90

Posted:

Greg,

What a shocker - an unresponsive bank! :-)

Seriously, what incentive do they have to sign the amendment? Probably none from their perspective.

Our documents also require 100% of written consents form first lenders for an amendment to be effective (but only 75% of the homeowners). Good luck getting a response from the banks, let alone the signed consent.

Maryland enacted a law in 2008 (HB1129) to allow the governing documents of homeowners associations created before January 1, 1960 to be amended once every 5 years by a 2/3 vote of homeowners. While it is not clear, it appears to eliminate the need for consents by any lenders. However, it only applies to HOAs and probably doesn't help here.

The only real hope is to convince the legislature to amend the law to bring the cut-off date up to a more recent date, or to eliminate it altogether, but that is a long shot. Another possibility may be to record the amendment based on the unit owners consents only (and whatever lenders you can obtain), so that the amendment would apply only to future lenders (and those lenders who now consent) but not to the current, non-consenting lenders. Check with your attorney to see if that is a possible alternative given your governing documents.

Everett

GregB5 (Maryland)
Posts: 5

Posted:

Everett, Thanks for your thoughtful response.

In the past, we've gotten bank consents for relatively unimportant matters (someone wanted to enlarge his penthouse windows, requiring a 2/3 approval by owners and mortgagees) but in this case, controlling the numbers of renters, the amendment is in the banks' interest as much as the HOA. Times have changed, no doubt.

I'm going to have our lawyer send a certified letter to the mortgage departments of the banks involved, copies to the CEO and legal departments: owners who want to sell are harmed (we'll say) by restricted availability of financing and insurance, dirctly attributable to the bank's lack of a businesslike response to a justifiable request.

Can't hurt. We'll see if it works.

Greg

SusanW1 (Michigan)
Posts: 5,202

Posted:

Do you have the legal right to limit rentals?

Perhaps this is why the banks are dragging their feet.

Are you prepared for a NO vote from these banks?

GregB5 (Maryland)
Posts: 5

Posted:

The number (percentage) of rentals? Sure, except as now prescribed in the Declaration.

And why would a bank vote "no" on an amendment that would mitigate the poisonous effect on the marketability of a unit in a majority rental building?

GlenL (Ohio)
Posts: 5,491

Posted:

Greg if you're still out there, if the requirement for the mortgage holder to approve any changes is not a law but in your CC&R's look for this language. I looked up our section for something else and it jogged my memory; look and see if your Covenant has language like this in it:

No amendment shall have any effect, however, upon a bona fide first mortgagee until the written consent to such amendment of such mortgagee has been secured. Such consents shall be retained by the Secretary of the Association and his certification in the instrument of amendment as to the names of the consenting and non-consenting mortgagees of the various Units shall be sufficient for reliance by the general public. If less than all mortgagees consent to an amendment to this Declaration and / or the By-Laws attached hereto as Exhibit C said amendment or modification shall nevertheless be valid among the Unit Owners, inter sese, provided that the rights of a non-consenting mortgagee shall not be derogated thereby.

nevertheless - however: despite anything to the contrary
inter sese - Latin for among themselves
derogated - to take away; detract

In English even if the mortgage holders don't approve it, the amendment is still valid among the unit / lot holders as long as it doesn't adversely affect the mortgage holder.

Studies show that 5 out of 4 people have problems with fractions

GregB5 (Maryland)
Posts: 5

Posted:

Glen, thanks, yes, still here-

Unfortunately our Declaration is unambiguous in its requirement that any "material change" (and this specifically includes rental regulation) requires the consent of 100% of the unit owners and mortgagees.

We may be making some progress, though. We have twelve units, and only five mortgagees, so that reduces the scope of the problem. We need three more bank consents, and we have one absolutely determined, never-quit unit owner here who got her own bank's consent by dint of dozens of phone calls and faxes up and down the chain of command, and days of work. She says, "I did it once and I can do it again," and she's taken on the three other owners' banks.

I'll report on her progress.

Greg

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