A foreclosure may be devastating for individuals and families.
A foreclosure occurs when a homeowner does not make their monthly mortgage payments and, as a result, they are evicted from the home by their lender. A lender has the authority to do this based on the contract that the home buyer signed with the seller or lender.
The home itself serves as collateral, which is outlined in the contract. There are some lenders that will allow a grace period in which payments can be made before foreclosure proceedings begin.
This grace period, however, only lasts a short time, often a couple of months, before the property is foreclosed upon. In general, if the borrower is behind on their payments, it is harder for them to catch up because, in some cases, there are also late fees that are applied.
What Are the Consequences of a Foreclosure?
If an individual is involved in a foreclosure, it can be a complex and overwhelming process. It is important for an individual to be aware of what the bank is permitted to do.
This is because, in some cases, a bank may try to cross these boundaries during the foreclosure process. Every state has its own set of regulations that deal with the foreclosure process.
The following is a list of issues to consider regarding what banks are permitted to do before foreclosing on a home:
- Some states require banks to determine if the homeowner qualifies for either a loan modification or some other form of help before foreclosing on the home;
- If the bank decides to do both at the same time, it is known as dual tracking and is illegal;
- If the homeowner applies for some help or loan modification, the bank cannot start the foreclosure process;
- The bank has to obtain a court order as well as file for an eviction before foreclosing on the home;
- The bank cannot padlock an individual’s home if they are still living in it; and
- If the individual reinstates their mortgage before the sheriff sale, the bank cannot continue the foreclosure process.
There are, however, some things that the bank is allowed to do during the foreclosure process, including:
- Banks can padlock the home if it is empty;
- The bank can seek alternative judgments if they are unable to sell the home at auction for what they are owed on the mortgage; and
- The bank can request a judicial foreclosure or a non-judicial foreclosure.
What Is a Homeowners’ Association?
A homeowners’ association, typically referred to as a HOA, is a governing body of a common interest community. This may include condominium complexes or other types of planned development communities.
HOAs are private associations that are responsible for managing homes and lots in the planned subdivision. Homeowners in these types of neighborhoods automatically become members of the HOA when they purchase their property.
In the real estate purchase contract, there will be a section that provides that the purchase of the property is part of a planned community and is a contract to pay the HOA fees and abide by the HOA rules. HOA fees are typically collected monthly or annually from residents.
These fees are used for the upkeep of the community common areas, as well as other shared structures. HOAs also have the power to enforce HOA rules, known as covenants, conditions, and restrictions (CC&Rs).
One common example of a HOA condition would be maintaining the landscaping of a home by mowing the lawn, trimming trees, and bushes, etc. If a homeowner does not comply with these requirements, the HOA may fine them or take them to court.
Defenses When a Homeowners’ Association Forecloses Your Property
Dues for HOAs are mandatory. If an individual is behind on these dues, the HOA has the right to hire a collections agency to collect those dues.
If an individual does not pay these dues, the HOA has the right to begin a homeowners’ association foreclose on the property to collect them. It is important to note, however, there may be defenses available to prevent a HOA foreclosure.
Depending on the state an individual resides in, they may have the right to redeem their property. In other words, they may pay past dues they owe to stop the foreclosure process.
What Triggers Foreclosure?
The HOA foreclosure process is triggered by a lien on the individual’s property. When an individual is late on their HOA dues, then the HOA can place a lien on the property.
If the individual does not remove the lien, the HOA may, at any time, choose to foreclose on that property to obtain their dues. Even if the individual is timely paying their mortgage payments, their property may be foreclosed upon.
What if I Don’t Have Money to Pay My Dues?
In order for an individual to remove the lien placed on their property based on their unpaid HOA fees, they would typically have to pay the entire HOA past-due assessments. If they cannot afford to pay that amount, they may try to arrange a payment plan to prevent a past due HOA fee foreclosure on the property.
What Are Some Defenses Available to Me to Lower My HOA Dues?
There are certain defenses that may be available to an individual to lower the amount of HOA dues that they owe. The individual would essentially argue that there was some type of misconduct by the HOA and that they do not legally owe the entire amount.
The available defenses to lower the amount due may include:
- The HOA charged an excessive amount for dues and miscalculated;
- The HOA assessments were mishandled and not used as specified in the CC&R’s;
- The HOA assessment late charges are unreasonable;
- The lien was recorded improperly; or
- The HOA did not follow the appropriate process for foreclosures.
How Can I Avoid an HOA Foreclosure?
As noted above, individuals may have the right to redeem and stop HOA foreclosures. However, not all states provide homeowners with the right of redemption to fight HOA foreclosures.
In the majority of cases, however, when a state does provide this right, a HOA cannot require a homeowner to waive this right in the CC&Rs the owner is required to agree to when purchasing their home.
A right of redemption typically occurs after a foreclosure sale has gone through. After this, depending on the type of foreclosures, the homeowner may have a period of time to buy back their property.
In California, for example, a property owner has 90 days after a non-judicial foreclosure to buy back their property. Even if an individual’s state does not have a specific right of redemption law, there may be other ways they can reclaim their property.
In most situations, a homeowner will be required to pay the entire amount of the HOA lean, including interest and attorney’s fees that are associated with the redemption. If an individual is facing a HOA foreclosure, they should consult with a HOA foreclosure attorney as soon as possible for help.
Do I Need a Real Estate Lawyer?
If you are facing a HOA foreclosure, it is important to consult with a real estate lawyer. A foreclosure is a complex area of law that may affect your credit score.
Your lawyer can ensure your rights are protected during the process, advise you what steps you can take to avoid the foreclosure, and attempt to negotiate with the HOA to come to a resolution.
