Is the HOA personally liable after foreclosing?

Although this issue is working itself out in another thread, I wanted to ask it directly.

Example: A homeowner owns a house with a $500K mortgage. The homeowner doesn't pay his HOA fees, ends up owing $20K to the HOA. The HOA forecloses on him. The HOA sells the house for $350K and gives the $350K to the mortgage holder.

(1) Can this happen? Yes? No? It depends?

(2) Can the bank that owns the mortgage come after the HOA for the missing $150K? Yes? No? It depends?

(3) Can the HOA somehow get its $20K legally in this scenario?

Way back when, I thought one thing. After a lot of reading, I thought another. But, not being an expert, I could be still wrong. Or it might all depend on the state that the house is in or the kind (judicial versus non-judicial) foreclosure that is applied. I'm not really sure.

Daniel,

I am curious what you have read to suggest that the HOA would become personally obligated to pay the mortgage? It did not sign the mortgage note, and it did not assume the mortgage note in writing.

Daniel,

I am also not an expert on this.

If the mortgage is $500K to sell the house for $350K would require an approval from the bank, wouldn't it? I believe this situation is called a short sale and is more complicated than a regular sale.

In the lien order HOA is usually the last, but in some states HOA has lien superiority for a certain amount of time. In Nevada they recently extended that time from 6 months to 9 (Assembly Bill 204).

Michael.

Richard, thanks for the confirmation.

I suspect that the confusion arises out of the phrase "subject to". That phrase has a specific legal meaning, namely, that the buyer (or entity acquiring by means of a foreclosure sale) has no personal obligation to pay the underlying debt but can itself lose the property if it does not pay the debt. Since the foreclosure action by a junior lien holder (the HOA) does not wipe out the lien of the senior lien holder (the bank) - a foreclosure only wipes out junior liens and its own lien - the HOA either pays the mortgage debt secured by the senior lien(s) or it will face a foreclosure action by the bank. But if it doesn't pay, the bank has no recourse against the HOA or against the assets of the HOA members, only against the property that secures the debt (and possibly against the assets of the original borrower).

Here is a definition of the phrase from www.dictionary.law.com:

subject to
adj. referring to the acquisition of title to real property upon which there is an existing mortgage or deed of trust when the new owner agrees to take title with the responsibility to continue to make the payments on the promissory note secured by the mortgage or deed of trust. Thus, the new owner (grantee) buys the property "subject to" secured debt. However, should the new owner fail to pay, the original debtor will be liable for the payment, but the holder of the mortgage or beneficiary of the deed of trust may foreclose and the buyer could thus lose title. This differs from the new title holder "assuming" the mortgage or deed of trust by a written transfer of the obligation. Such a transfer must be approved by the lender, since the new owner's credit may or may not be as strong as the original owner/borrower's.

While the definition is pointed towards an open market purchase, the same principle applies where the title was acquired by foreclosure deed.

It depends on your state entirely

In Florida I am President of a low income HOA here are the facts

Florida State law states a HOA is always allowed to instigate a lien on any property within the hoa membership rolls.
Next is the issue of the length od the lien in Florida in a HOA it is 5 years but the state screwed every HOA because the banking Lobby is the strongest lobbying group inthe entire state. They had a law passed By Rep Robino that states a HOA or a Condo can only collect 1 percent of the morgage inunpaid assessments ( Monthly dues )or 6 months which ever is lesser.

Suggestion find a realtor who is good at Short sales. The HOA must take title in court average cost $3000.

However if you are smart get a company with a lawyeron board for hearings and demand a flat fee for the foreclosure. Plumbers and electricans do it why not Lawyers?

make a written policy based on your docs at 2 months member goes to lien agency they have to wait 45 days to install the lien then the next action is after the system runs its course ( usually 4-8 months ) this also depends on the county. broward forces arbitration a additional 3-5 month wait occurs. so as you can see you are lucky to get the operation in 2 years or less is not the norm but the average.

Now there is a way out you must foreclose the member asap. Sign a limited power of atty to the real estate co and they force the bank to accept the price they are able to sell the house for. Have your atty watch the paperwork like a hawk for any error no matter how insignificant it may seem. We have become primary lien holder because the banks atty screwed up the paperwork house is now for sale

Before the CRA was put in place by Congress our values were in the 200+ 000 area rightnow the highest sale price to date is 125,000. That hurts yes but witch is worse looseing all the money or looseing a portion of the money?
One last thing you can dois find a law firm with the guts to get a person appointed by the court to be a rent trustee for the development and rent out the place until the bank gets around to forecloseing as in Florida they usually are the superior lien holder. Thats why you watchthe paperwork carefully. On average pre-CRA the average foreclosure in a law firm was 5-15 in Broward County the average is 400 to 1200 per firm.................hence the whole thing grinds to a halt???????????????????

Have a nice day yes I have lived thru this and we are trying something new now. I will not say what it is but its different. As to the original problem the BOD has to stop running that HOA like a social club and start running a business operation. If you pay everyone pays very simple credo

Hope this helps to understand a nightmare in Florida.................