Why Should HOAs Have More Rights Than Lenders?

HOAs are getting some bashing these days – the government is stepping in on lenders – requiring them to treat their borrowers fair when it comes to foreclosure – to not lead them on through foreclosing at the same time they are reviewing modification apps, and so forth. I do not have issue with that. The lenders are a large part of the problem when it comes to people losing their homes, and the depressed values.  Bad loans are what I am talking about – loans to individuals who really could not afford the properties.

But lumping HOAs into that distasteful batter is not fair!!

Why?

Because homeowner associations have no say over who can purchase property in them. There is no opportunity to check the financial viability of the buyers or residents. Nor is there an opportunity to negotiate terms that protect the association.

Homeowner associations do not get collateral.

It is true that most homeowner associations have the right to foreclose for unpaid assessments. It is not true that homeowners can “walk away” from the association debt like they can “walk away” from a home, and avoid paying off the loan they signed on for.  Most HOA documents (this includes Condos) give an association the right to either foreclose for unpaid assessments (which only makes sense if there is equity in the property so it will sell at the lender’s foreclosure), or to pursue a personal debt action against the owner who doesn’t pay, even when he or she abandons the property.

Why should the HOA have this extra layer of protection, i.e., the ability to go after owners who skip out on the assessment obligation?

1. The HOA is often required to go on performing maintenance on and around the home, even when the owner is not paying AND (even more hurtful)

2. The other owners in the HOA have to pick up the slack for those who don’t pay.

So don’t be quick to judge when you find out that your HOA is going to come like a bulldog after delinquencies – its for the protection of all of the other owners!

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5 Responses to Why Should HOAs Have More Rights Than Lenders?
  1. Marilyn Gallagher
    April 23, 2012 | 2:11 pm

    I have a window well that was improperly installed when the townhome was built in 1998. It is now rusting & has other water issues. An extension had been put on but was not sealed. It was placed too close to rebar causing the rusting. Then the assoc put on a faulty drain about 8 inches from the well which drained into the well. They say that I need to incur the expense of a replacement, that it is an assumed window. The have indicated that they have nothing in writing to back this up. Who should pay for a replacement?

  2. kim
    April 24, 2012 | 4:24 pm

    Banks??
    Your statement;
    “The lenders are a large part of the problem when it comes to people losing their homes, and the depressed values. Bad loans are what I am talking about – loans to individuals who really could not afford the properties”

    My Response;
    BANKS OFFERED bad loans. I am a home owner and have owned 2 houses and 2 condo’s in 3 States. I never went to a Bank for a Loan, it was the Real Estate BROKER who GOT THE LOAN for me! It was the BROKER who chose those rotten tomato’s to sell to me, NOT THE BANK.

    You know, those Real Estate BROKER’s who have to have a license to be a PROPERTY MANAGEMENT COMPANY steering the HOA Associtations? Yeah, the same people.

    So, my comment is, IS IT REALLY THE BANK THAT PUT THOSE BAD LOANS IN THE HANDS OF THE BUYERS, OR THE BROKERS?? The REAL ESTATE INDUSTRY IS RESPONSIBLE FOR THE REAL ESTATE CRISIS, NOT THE BANKS. HAD THE BROKERS HONORED THEIR GOOD FAITH AGREEMENT TO GET THE BUYER THE BEST LOAN, WE WOULD NOT HAVE A REAL ESTATE CRISIS. SUPPLY AND DEMAND.

    Kim

    • Beth Grimm
      May 3, 2012 | 6:30 am

      I am not sure if you are doing well with your real estate or not since you have owned a fair amount of property. Just know that i agree, the real estate industry was part of the cause of problem too – because the agents and brokers were often responsible for leading owners to the lenders who did all the “creative financing.”

    • Beth Grimm
      May 3, 2012 | 6:30 am

      I am not sure if you are doing well with your real estate or not since you have owned a fair amount of property. Just know that i agree, the real estate industry was part of the cause of problem too – because the agents and brokers were often responsible for leading owners to the lenders who did all the “creative financing.”