Bad news on delinquencies - what to do

For some time now, our BOD has worked hard at reducing the number of delinquencies in our community. The year before last, we sent out a 2 1/2 page letter with the budget explaining what could happen if we don't get them under control.

One of the things we warned homeowners about was government programs like Fannie Mae not underwriting mortgages if the delinquency rate was too high. Well, at last night's meeting, our property manager brought us a letter announcing that one program (I won't say which one)is going to do just that.

We are hiring a new collection attorney we hope to give us a bigger "bang" for our buck and as treasurer, I plan to consult him regarding setting minimum requirements for payment plans, but I would also like to advise homeowners of this letter to drive home how serious this is. At first, I thought about putting it in the newsletter, but now I think a separate letter would be a better idea. We will also discuss this at next month's annual meeting (usually poorly attended, anyway, but you have to start somewhere)

If this has happened in your community, I'd love to hear how you're handling it - I'm sure we aren't the only ones. Any ideas on how to word such a letter and minimum requirements for payment plans is helpful, too

That's a great idea! Maybe if people see how much their balance can rise, they'll be more inclined to contact us first to negotiate a payment plan.

DennisB,

I agree, in that the attorneys do not have a great collection rate, and if they don't collect we still have to pay for there service fees. Our office manager (who runs everything) has had a much better collection rate, in fact we pulled almost all of the collections from the attorneys and gave then to her. She also does all of the liens including the filing with the county. This has saved us several thousand in fees (we filed 22 liens in 09).

For those of you bad-mouthing attorneys, remember that it all depends upon the attorney. Of couse some will be bad, but others may be very good. My HOA happens to have a very good one who has been very successful in collecting quite a few delinquencies with just one demand letter. An attorney is no different than any other service provider. Don't form your opinion against the whole profession because of one rotten apple!

MaryA1,

The property owners took control of the POA in Feb of 2006, and have gone through two different attorneys both companies were set up to handle "homeowner association law", our current attorney actually takes personal checks from delinquent property owners, and then has no clue when the checks bounce. We spent over $12,000 last year in fees and have collected less than half that. I guess we just had two rotton apples.

Thanks for the comments and suggestions everyone! (I thought the thread was about to die on the vine).

DennisB6 – our current attorney HAS done more than send letters and he has been successful with a number of accounts, but he also has a small firm and the board (I’m treasurer) suspects the workload is too much. We’ve had a few instances where two or three months went by without any action until we reminded him. I know court action can be responsible for some delays, but we need to know why there’s nothing to report (we get a report from him every month). It also seems we have to pay extra to do things like a Lexis search for AWOL homeowners, whereas we will get more services with the new attorney (and a bigger bang for the buck).

I would like to hear more from you on your experience with collection agencies, however. Right now, we send our accounts to them after we’ve tried everything else in hopes they can collect something (it may not be much when you factor in their fees). Maybe we should try the collection agency before the attorney to try and get the money sooner without paying more legal fees.

JimM15 – you filed 22 liens last year? Wow! I hope that’s been successful – about a year and a half ago, we started pursuing liens and judgments, in hopes of further protecting the Association’s interests. I expect we will soon have as many (probably more), especially since the state legislature changed the law last year to make liens more favorable to HOAs. We have had a few cases where the mortgage company foreclosed and there went our lien, but we’re hoping the judgment will follow the homeowner around for a while – if we can’t get our money, why should he or she be extended more credit?

RogerB – I like your idea on proposing new rules regarding delinquencies – I’ve already spoken to the board about setting minimum standards for payment plans and after getting the news about the government program not underwriting mortgages in this community, it would appear we’ll need to review our current policies to see what needs changing. Your suggestion about taking some of the accounts back from the attorney is also interesting, but in our community the deadbeats didn’t do ANYTHING until they got a nastygram from the attorney. Right now, there are probably two I think we could take back, but the rest….hell to the naw, as Whitney Houston once said!

Collection agencies are like any other business, there are good ones that follow the law and there are the ones that blatantly violate it.

Helen a HOA law firm in Florida might just have found the way. From the HOATalk news page:
www.abc-7.com/Global/story.asp?S=11884168

Helen,
From the information you have posted, it appears your BOD has just taken a hands off approach since day one, when he moved in. Is this correct?
Your evaluation of the housing market seems to be pretty accurate, albeit non reactive and you seem content there is nothing you can do now that the Bank holds title. They must have some court vested interest in the property or they could not secure it. You can bet the Board is attempting to recover any money they can and probably through a collection agency. But what have you all done? Your association has a vested interest also. When the property is finally foreclosed or maybe even sold by the bank, first in line will be the mortgage holder. If you all don't have some lien on that property, you will probably get nothing. What does your attorney say you must do to stand the best chance of recovering funds owed? Did they recommend filing a lien against the property owner when he was living in the association? Now that he is no longer there did your attorney say he no longer is responsible? I doubt that, certainly the mortgage holder is going to do everything from filing liens to using collection agencies. State laws are different, and each association should have in place, as stated many time on this site, and each delinquency must be processed alike.Maybe you have this under control, I hope so.

HelenK,
The below was posted on another thread. Run it by your attorney and see if it helps. Not sure what state?
If you can use it, please post back. It does seem to extend responsibility.

Section 4. Assessments; Creations of the Lien and Personal Obligation. Each lot owner, except Developer, by acceptance of deed for the lot, whether or not it shall be so expressed in such deed, covenants and agrees to pay to the Residents Association (i) annual assessments of charges, and (ii) special assessments for improvements, such assessments to be established and collected as provided in this Article IV. Developer shall be responsible for the maintenance costs of the Residents Association by the lot owners, until Developer transfers control of the Residents Association. The annual and special assessments, together with interest, costs and reasonable attorney fees, shall be a charge on the land and shall be continuing lien upon the property against which each such assessment is made. Each such assessment, together with interest, costs and reasonable attorney fees, shall also be the personal obligation of the person who was the owner of such property at the time when the assessment fee due. The personal obligation for delinquent assessments shall not pass to his successors in title unless expressly assumed by them.

Sorry that would be 30 day notices

Helen,

Have your attorneys indicated where opting-in is required by the statute? Although I haven't read the entire Condominium Act, I see no such provision, and as others have said in other threads, state laws supersede your governing documents.

He said that we would need to ammend our declaration We had 1 forclosure (sherrifs sale) and new buyer (which happenned to be a subdivsion of the original lender) asked for the account ledger from the attourney They were given the entire ledger and they only paid us from the date of the sherrifs sale and nothing before