From Mortgages Blog:
Here in Florida, the Foreclosure State, we thought we’d already cataloged every genus responsible for this plague on all our houses, from the predatory lenders to the oblivious robosigners and rocket dockets to the no-mod-for-you bank Nazis. That was, until we caught wind of the HOA chasers.
The St. Petersburg Times recently profiled an opportunistic little industry that discovered a loophole in the state’s foreclosure laws and is milking it for all it’s worth.
Florida law allows homeowners associations, or HOAs, to foreclose on properties when dues are in arrears and does not require the HOA to notify the primary mortgage lender. Florida has 40,000 homeowner and condo associations, many struggling to keep basic services going with so many owners behind in dues. The HOA’s lawyers encourage them to foreclose because, if the bank beats them to it, they usually won’t see a cent.
Here’s where opportunity creeps in: Since most homeowners owe less than $15,000 in association dues, the HOAs can file their foreclosure cases in county court rather than in circuit court, where caseloads are backed up. This allows the associations to get final judgment on a foreclosure in as few as 270 days verses the 617 days it now takes for the average bank foreclosure.
Yes, a mortgage lender would gladly pay the back dues to protect their investment — if they knew about it. But because the HOA doesn’t have to notify the bank of its foreclosure actions, it could be months or even years before the primary lender forecloses.
Enter HOA chasers like Barry Haught and his associates. They acquire HOA foreclosures in private for pocket change, since they only have to pay off the delinquent HOA dues, not satisfy the mortgage. They then rent the property, and sometimes live there, for the months and even years it takes for the bank to foreclose.
This loophole has allowed Haught and his associates to acquire 71 properties in Tampa’s Hillsborough County worth $8.2 million for a little more than $220,000. Among his deals: a $1.2 million home on Tampa Bay for $10,010; a 3,700-square-foot home for $8,090; and dozens of single-family homes for $4,000 apiece.
And no, they are under no obligation to inform their renters that the primary lender could unceremoniously kick them to the curb one day.
Did I mention that this is all perfectly legal?
We’re used to this stuff in the Foreclosure State, where the unofficial state motto is: Only in Florida!
This is just bad in so many ways. I won’t go into all of them. But what does this say about the general notion of self governance for neighborhoods as exhibited by HOAs?
These HOA laws were designed by real estate lawyers and passed by the states to help developers sell homes. HOAs protect home values! What a bunch of bull. The only thing that protects property values are homeowners with jobs and a keen interest in taking care of their property. If either of those two is absent, the neighborhood is going to fall apart no matter who is on the HOA board or what is written in the covenants.
Any HOA board member who would foreclose on a home in their neighborhood because of delinquent dues is a first class fool. They’re also probably a bit of a criminal too.
You’ll know we’ve regained our sanity as a nation when these mostly gangster HOAs are outlawed (tough to do when local counties are right there at the table with developers, allowing them to create these legal straight jackets).
A developer should have to meet a strict set of criteria before creating a HOA. When counties finally come to their senses and learn that whatever gains they achieve in the short term or greatly reduced in the long term, they’ll put more restrictions on these things.
Jim,
Doesn’t CA have a 90 redemption period for HOA foreclosure auctions? Thus, this cannot happen here.
Really? In Florida you’re allowed to lease a rental knowing it might be foreclosed? I’m pretty sure the landlord can be sued for breach of contract there regardless of the state.
If it’s no lease, then of course you can get kicked to the curb any day. That’s what a lease is for.
consultant, foreclosure in many cases is the only recourse left for an HOA. And stop making things up about HOAs. HOAs were designed by builders to cut costs and make units appear cheaper than they actually are. Your other assertions are pretty off the wall..I’m not sure if you even know what an HOA is.
Stealth Broker, yes, CA does have a 90-day redemption on HOA Foreclosures. But if it isn’t redeemed after 90 days then the title does fully change hands. Right now, this is mostly happening on condos in the Bay Area where the back HOA fees are approaching or exceeding the value of the condo. There is one community in SoCal that’s actively foreclosing on single family homes (as OC Renter affectionately named it): Fraudera Ranch.