Bank foreclosures are unfortunately expected to peak in 2011. RealtyTrac Inc. estimates that more than 1 million homes will be repossessed this year. The Mortgage Bankers Association just reported that 4.6% of homes were in the foreclosure process last quarter, which is an all-time high for that survey. Condominium and homeowners association boards need to be prepared to deal with bank foreclosures in their communities.
It is a good practice for associations to take pro-active steps to inform banks of their interest in the properties at issue. If owners fail to pay assessments or dues, liens should be recorded on their units or lots. This makes it more likely that foreclosing banks will contact the association. If notices of trustee's sales are received, letters should be mailed to the named trustees regarding the applicable assessment obligations.
If a bank has completed a foreclosure against a property within your association, the board should promptly contact the bank to request payment of any amount due to the association at that time and the regular assessments after the foreclosure date. However, the bank may well ignore such a request. Many community associations have discovered in recent months that many banks' preferred practice is to foreclose and then refuse to pay any pre-foreclosure delinquency or post-foreclosure assessments until the property is re-sold. If your association encounters such a situation, it is entitled to treat the bank the same as any other owner and initiate a collection action against it.
Banks often respond quickly to demand letters from attorneys after foreclosures. One important reason for this is that banks (sensibly) do not want to pay their attorneys and associations' attorneys to argue about money that they are clearly obligated to pay. Associations' legal right to obtain awards of attorney fees related to debt collection against banks provides a powerful incentive for banks to pay associations sooner rather than later.
If banks persist in refusing to pay delinquent assessments or dues after receiving attorney demand letters, associations can pursue their own foreclosure lawsuits and even establish receiverships over properties to collect rent. Those types of aggressive actions are sufficient to convince most banks to pay associations what they are owed.
It is a good practice for associations to take pro-active steps to inform banks of their interest in the properties at issue. If owners fail to pay assessments or dues, liens should be recorded on their units or lots. This makes it more likely that foreclosing banks will contact the association. If notices of trustee's sales are received, letters should be mailed to the named trustees regarding the applicable assessment obligations.
If a bank has completed a foreclosure against a property within your association, the board should promptly contact the bank to request payment of any amount due to the association at that time and the regular assessments after the foreclosure date. However, the bank may well ignore such a request. Many community associations have discovered in recent months that many banks' preferred practice is to foreclose and then refuse to pay any pre-foreclosure delinquency or post-foreclosure assessments until the property is re-sold. If your association encounters such a situation, it is entitled to treat the bank the same as any other owner and initiate a collection action against it.
Banks often respond quickly to demand letters from attorneys after foreclosures. One important reason for this is that banks (sensibly) do not want to pay their attorneys and associations' attorneys to argue about money that they are clearly obligated to pay. Associations' legal right to obtain awards of attorney fees related to debt collection against banks provides a powerful incentive for banks to pay associations sooner rather than later.
If banks persist in refusing to pay delinquent assessments or dues after receiving attorney demand letters, associations can pursue their own foreclosure lawsuits and even establish receiverships over properties to collect rent. Those types of aggressive actions are sufficient to convince most banks to pay associations what they are owed.
