People living in HOAs are getting a raw deal when the homestead statutes and bankruptcy laws do not protect against HOA liens. But, maybe a solution to draconian foreclosures is possible by using the reverse mortgage process.
In short, the RM is a HECM loan (see Hud’s Reverse Mortgages) that allows the owner to remain in his home mortgage free and provides him with cash for his unrestricted use. A condition of the HOA RM would be to pay HOA dues thereby cutting out the unconscionable enrichment of the HOA lawyers. The term of the loan can be set, say, to 5 or 10 years at which time the owner must pay off the loan or sell his home to do so. This will allow the owner to live there for some period of time before selling, yet give the HOA its assessments.
Others issues that are handle are: currently, the RM is set to about 16 years (age 78 if 26 at time of loan), so the special term limit is necessary to protect HUD; and there must be sufficient equity to offset the steep discount in cash available to owner by RM, but this condition exists today with the current foreclosure process.
Adopting this approach is not only doable, but makes the HOA “community” a true community with a heart. I mean, the IRS is not as harsh as the HOA in taking one’s home or garnishing wages to collect unpaid taxes.
(Proposed to Arizona Legislator).