HOA foreclosures new findings

Judgment DayIn my recent Commentary on homeowner associations  foreclosures, Eliminate your mortgage through HOA foreclosure, further research revealed from very surprising information.

In the July 2004 foreclosure, the homeowner obtained title to his home some six months later after paying the HOA some $8,000. He received a quitclaim deed — take the property as is. A few months after that, June 2005, the original owner sells the property to buyers who sign a $144,000 deed with another mortgage company. Recall that the original 2000 mortgage was for some $96,200, understanding that, unlike today, that period was one of rapidly escalating home prices. Very interesting, indeed!  Still, no information on the status of the original mortgage company loan, but I must assume a title search revealed this existing mortgage. Curiously, there is a second note, signed at the same time with the same bank, for $36,100. That’s a total of $180,100. Why two notes, again?

In the September 2009 foreclosure, I’m told by a homeowner attending the HOA meeting that the board is aware of the $160,000 mortgage, and told the members that they would never do this again. The board was planning to sell the unit. (As of this writing, 2 months later, the unit is not up for sale). Now, this HOA is facing some very serious legal issues, for the board and its attorneys, and for the members. The immediate question on my mind is for what reason did the board buy this unit?

The first reality in attempting to sell the unit is the fact that a buyer would get a title report, which would disclose the existing mortgage that he would have to payoff. That means the HOA can only get any excess beyond this mortgage. In other words, the HOA is back in the same position as having bought at the auction: payoff the $160,000 mortgage. A search of for sale units in the HOA revealed prices of about $169,500 for similar units. It doesn’t appear that the HOA would come out ahead in this transaction. Of course, it could always quitclaim the deed to some buyer for $16,000, and that includes the original owner. Is this foreclosure going the route of the 2004 foreclosure? We shall see.

So, what did the HOA accomplish? A lot of potential liability for the members since it will eventually need to pay the mortgage. That’s what!  And, in today’s market it can easily get stuck with the property.  I’m curious as to just what was the role of the HOA attorneys who constantly tell they board that reliance on expert advice will absolve them from personal liability? Someone care to explain?

As a note, the Dept. of Justice (DOJ) has requested information on this 2009 foreclosure since the mortgage company had filed for bankruptcy.

Published in: on November 14, 2009 at 9:08 am  Comments (1)  

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  1. Have you learned anything else on this case? Thank you for posting this important information. I am facing judicial foreclosure by the HOA for association dues debt. My mortgage is current and I have the ability to make payments on the HOA debt but the lawyers will not accept anything but payment in full. (I have also tried to sell the condo for years, but the values went down so much in the property located in Tucker, GA that I could not sell it for enough to pay off the mortgage) I asked for help in the form of a loan from the mortgage company, since my payment history with them is excellent and my credit score at this time is good. I thought that they would rather continue receiving timely payments from me than lose their investment to the HOA. I am also concerned that the mortgage company will still seek payment after foreclosure. Any help/comments appreciated.

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