Monday, May 23, 2011

Continued real estate deflation making foreclosures unappealing to HOAs

HOAs file foreclosure notices “fairly regularly, but in 99% of the cases, the property is worth less than the underlying debt. Just because you get a house for $6,000 doesn’t mean you get a bargain on the home,” says Kurt De Meire, CEO of countyrecordsresearch.com, a foreclosure processing company.

“This is why it’s rare that associations follow through with their own foreclosures,” he says. “They don’t want the burden of the senior debt.”
In fact, most associations don’t even bother starting the foreclosure process, he says. “It’s a waste of their money to pursue a property for unpaid dues.”

De Meire says sometimes homeowners associations foreclose, evict the residents, then decide not to keep the senior loan or loans current. But using a foreclosure notice as a tool to persuade a homeowner to pay fees or force them out, he says, costs HOAs “several thousand dollars.”
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As residential real estate prices continue to deflate, foreclosure becomes an increasingly impractical means to recoup delinquent HOA assessments -- at least from the perspective of this foreclosure processing company head.

3 comments:

pvtgov said...

Can Evan comment on the Reverse Foreclosure process in Florida that doesn't put a stop to foreclosures? And what about HOAs foreclosing and taking the lot subject to the mortgage, and then renting?

Anonymous said...

The threat of foreclosure is mainly being used by the HOA management companies and HOA attorneys. If they can't threaten foreclosure, then they can't collect outrageous fees as they typically do in many states. It is not uncommon for the HOA attorney and management company to collude to collect $10,000 $15,000 to $25,000 over assessments of $300 to $700.

Anonymous said...

This article is bogus. First of all the HOA doesn't have the option of "deciding" to keep a senior loan current. These aren't assumable loans and certainly not at the whim of the HOA board or vendors. The HOA vendors frequently target homeowners with large amounts of equity (e.g., mortgage free homes).