Friday, December 16, 2011

Associations can benefit from short sales vs. foreclosures -

Associations can benefit from short sales vs. foreclosures -
Foreclosures are an unfortunate circumstance for borrowers and lenders, but community associations also take a hit. Struggling owners who owe more than their homes are worth often are behind in their assessments as well as their mortgages. Associations are lean operations, and when just a few owners don't pay, the rest must make up the difference or leave bills unpaid.

A short sale can be a satisfying resolution for all parties, say many real estate and association professionals.

True, but the association has no power to make a short sale happen. That is between the owner in default on the mortgage and the bank. And check out this statement: "Lenders prefer short sales over foreclosures because foreclosures are more expensive and time-consuming, said Eric Hamilton, a mortgage consultant with Wells Fargo Home Mortgage in Aurora." With no disrespect meant to Mr. Hamilton, this is not what is happening. It is very difficult to arrange a short sale because the "lender" won't agree to it. The reason is that this term "lender" is a misnomer. Mortgages are not owned by actual lenders. Mortgages are sold by originators, who then may or may not become the "servicer" of the loan. Mortgages are owned by investment trusts who buy residential mortgage backed securities. The servicer collects the payments and sends them to the trust, and handes the foreclosure. These servicers do not want to spend time and energy negotiating short sales. They want to prosecute foreclosures, because that's how they get paid. Many of the servicers are banks that hold second mortgages which would be wiped out in a short sale, a conflict of interest that is preventing short sales.

1 comment:

Anonymous said...

Too often the management companies are an absolute impediment to transferring property. These organizations are economic "rent seekers" - seeking to make a buck off of someone else's property while adding no value whatsoever.

For example, attempting to hold homeowners hostage with "resale certificates". How about the legally questionable "transfer fees". How about "certificate of compliance" fees?

Homeowners are challenging the management companies in some places. Here is a great story on a challenge to the "transfer fees" in New Jersey. The homeowners do not contract with and do not receive services from the management company. Yet the HOA/condo management company attempts to extract fees from the homeowners - for services that are not provided, desired, or offered. The management companies will jeopardize the sale in order to extract these fees. Former owners are demanding disgorgement of those fees after selling their property.
Legal Challenge to Transfer Fees

Through schemes such as the "priority of payment scam", the management companies also manufacture "defaults" for their own profit. The management company contract often provides for the management companies to collect more fees in the event a homeowner is in arrears on assessments. Many management companies scheme to manufacture bogus defaults (by re-characterizing your assessment payment) and thus to generate junk fees for themselves. In the context of condominiums, this unscrupulous management company practice now threatens the ability of every owner to sell property.