Not that easy for HOAs to deal with banks

Q: In the Dec 27 Review Journal, the "Q & A" addressed the banks' responsibility to pay homeowners association fees, etc..

It is a matter of public record to get the listing of the owners and the banks that hold the note for the properties, which are going, or are in foreclosure. So it should not be difficult to obtain the information to contact the responsible parties at the banks so the HOA dues can be paid.

Instead, the past-due fees and the upkeep of the (foreclosed) properties are becoming the responsibility of the homeowners who are not going through this terrible ordeal in this state.

We have been in a recession for about one year and the associations should have done this awhile ago. No excuses.

HOA dues are being raised to recoup what can't be paid due to the foreclosures in gated communities.

Are the homeowners going to get a credit? Or, are the associations in the Las Vegas Valley going to mismanage the HOAs and get into trouble with the law -- (getting) sued. Because some have.

Associations are not doing a good job managing the funds. They are forcing us to pay for others misfortunes. That's why there should not be gated communities in the Las Vegas Valley. This was left out of your "ASSOCIATION Q&A article." -- A person who hates HOAs

A: I wish it was that simple. It is not.

If I own the house and I am being foreclosed upon, the association would not know about the mortgage delinquency until it received a notice of default. The association is also recorded as a lien holder, per the recording of the association's covenants against the property, which was placed upon the house when the it was first sold.

The mortgage company is legally responsible for sending such a notice to all parties that have liens on the property.

Unless you were to do a title search on each homeowner, you would not know the mortgage company, as it is not listed in the public record, which lists the owner's name and the address of the specific property. Title searches cost money that is unnecessary because the mortgage company is required by law to notice the association.

If the association had been foreclosing upon the homeowner for non-payment of assessment before the lender began its foreclosure, the lender's loan is a super-lien which will supersede the foreclosure process of the association. Normally the association will suspend its foreclosure process and wait for the lender's foreclosure process to be either completed or cancelled.

If the lender's foreclosure is cancelled, the association's foreclosure will continue from that point where it was temporarily suspended.

Now, the association could ignore the lender's foreclosure and attempt to complete its foreclosure before the lender completes their foreclosure on the property. Assuming that this does occur, the association would become the owner of the property. The association would then be facing a foreclosure from the lending institution as their loan has not been extinguished and is still owed.

Generally speaking this alternative is not cost-effective for the homeowner association, which would then be responsible for the maintaining of the house, paying property taxes, insurance, and sewer or association and master association assessments.

In addition, the association would have to try to resell the property which is not easy with the current market conditions of Southern Nevada, especially in the case where the loan may be greater than the selling price of the property (which is now often the case).

The foreclosure process is a time-consuming process that can take over nine months before it is completed, assuming that the homeowner does not file bankruptcy which further complicates the issue for the association.

During the foreclosure process, whether it is initiated by the lender or the association, the homeowner still owns the house, whether it is occupied or not occupied.

The association cannot just step in and start maintaining the house, for example keeping up the front lawn. State law requires a certain notification process, which takes time.

In addition, the association's governing documents must explicitly state that the association has the right to come onto an owner's private property to perform maintenance that is the homeowner's responsibility. Also, that is assuming that the association even has the funds to perform such work.

The association's only other alternative is to fine the homeowner until he or she either complies, or there is a new homeowner. The fines are not recoverable and cannot be transferred over to the new homeowner.

The problem the associations are facing is that so many lending institutions are not paying their assessments, as they are waiting for the homes to sell and then to pay the association its money. In the past, the sale could have been consummated in a few months. That is not the case now.

In some cases, it has taken a year before the home has been sold by the bank. The bank is like any other homeowner and if the bank is not paying its assessments, the association has to begin foreclosure against the bank. That was the primary point of the article this past Saturday: To encourage associations to initiate foreclosure against the lending institutions in order to obtain compliance and to obtain its fees.

This is a typical scenario where the association has started its foreclosure, for example in January, 2008, and by June the association's foreclosure process is still ongoing, with a sale date some time in August, 2008. Assume six months have passed and then in June the lender begins its foreclosure process. The time line is now further extended until some final resolution occurs with the purchase of the home from a buyer. It is not difficult to have the lender's foreclosure process continue in the new year, 2009.

What makes you think that the association's expenses will be reduced? Water, electric, gas, (rubbish and sewer for some associations) are expenses that the association must pay. Utility companies do not care if your monthly collections have been significantly reduced.

Insurance must be paid. Many associations have to pay property taxes and federal income taxes.

When money coming in is reduced, the association may have to reduce other expenses which could in some case reduce some of the services that had been offered in the past.

If you are in a gated community, the required reserves may be more than a non-gated community, since the interior streets are owned by the association (the homeowners) and the state law requires proper funding of the reserve account. In some cases, the association may have to increase the dues because of the delinquency in order to pay its basic obligations.

If associations are having difficulty in obtaining the monthly assessment from the lending institutions, what makes you think that they are more cooperative in maintaining these homes. Many of these homes are not being professionally managed. Many of them are for sale by Realtors who do not have authorization to maintain the home. The only recourse for the associations is to fine the bank, which in this case, the fines are recoverable when they sell the home.

Whether or not you like associations, the association is financially supported by its paying members. Look what is happening now on a global level.

I pay my mortgage every month. Why is my tax-paying dollars funding lending institutions that loaned homeowners money over 100 percent value of their homes? Why is the federal government borrowing money to bail out the banks, Wall Street and the automobile makers? What debt is the federal government placing upon me and my grandchild whose taxes will have to fund these bailouts? Am I and others like me, the suckers because we work hard and pay our bills only to assume this federal debt because of greed, golden parachutes of executive officers of corporations and poorly managed companies?

Like it or not, that's reality on the federal level and like it or not associations and its good paying members will have to carry the association until the economy is better and the country including Nevada is no longer in a major recession.

Barbara Holland, certified property manager, broker and supervisory certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to Association Q.&A., P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759, or she can be reached by e-mail at support@hlrealty.com.