I wish I could tell you that I am surprised at some of the issues being brought up during the processing of my clients' mortgages these days ... but the element of real surprise is long gone. It's now become "what will they think up next?" I certainly gain an education on many topics ... and it's never dull in my lending world.
All sorts of credit issues, employment, liens, personal histories, financial accounts, retirement accounts, and more ... for both buyer, seller, and even those providing buyers a monetary "gift" ... are coming under scrutiny. Detailed explanations are being demanded for everything. You don't comply, you don't close.
Now, it seems, there is to be one more issue to face ... and many lenders will likely be confronting it increasingly often and asked for clarification of circumstances during future processing.
That's the growing number of rigid and aggressive stands Homeowner Associations in many states are taking on overdue HOA fees.
Liens and Foreclosures are resulting from these actions!
This point was driven home to me when reading a recent article on www.npr.com, the National Public Radio website. This article told of an Army National Guard commander that served our country in Iraq just last year.
While in Iraq on mission, his wife called him in an almost hysterical state. The Homeowners Association that represented their subdivision in Texas had foreclosed on their $300,000+ completely paid for home. His wife had missed making only two payments. Someone had taken advantage of their delinquency and purchased the home through the court system for just $3,500 ... the amount outstanding on HOA dues and the Association's legal costs.
There are 33 states across our country that have ruled that Homeowner Associations need not even go before a judge in order to collect on liens they have placed on properties. In many of these states, foreclosure is also allowed on these liens ... Texas being one of those states. This is called nonjudicial foreclosure. (Additional information regarding Foreclosure Procedures by State).
In most instances, dues may not make up the majority of the dollars owed in a lien ... as legal costs are paid by the homeowner as well. As the economy has grown worse, HOA's have become increasingly more forceful in their pursuit of delinquent association fees. In Texas alone, what WAS the cause of only 1% of foreclosures, has now grown to 10%+ presently.
This is information that everyone in the real estate industry should be aware of. The chances of this popping up during processing of a home will be rising in many areas, whether the sale is involving individual homeowners or lenders.
Homeowners, (depending on the laws of their states), entering into purchase transactions that involve HOA rules and fees MUST be educated and alerted to the importance of making timely payments ... and the ramifications they will face if they do not do so. There could be extreme consequences.
There is some good news regarding the commander and his family from Texas. In 2003, Congress passed the Servicemembers Civil Relief Act. This Act is meant to protect service personnel and to prevent nonjudicial foreclosures against those actively fighting overseas.
The commander and his family hope that a judge rules that the Homeowners Association acted illegally, and that the sales transaction will be nulled, and their home will be returned to them. The case is currently slated for court at the beginning of the coming year.
Gene Mundt, Sr. Vice President
Personal NMLS #216987
Chicago Bancorp NMLS # 63483
1823 Centre Point Circle, Naperville, IL 60563
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