Reverse Foreclosures and Blanket Receiverships Help Keep Associations Out of Financial Trouble
Condo and Homeowner Associations find new ways to collect overdue fees.
Palm Coast, FL – March 8, 2010 – When property owners in deed restricted communities find themselves upside down with their lender, they often stop paying association fees, figuring the house or condo is going back to the bank anyway. While the property owners don’t pay, the banks put off foreclosing, but the associations still need to keep the water running and the lawns mowed. Reverse foreclosures and blanket receiverships help keep associations out of financial trouble.
Two pieces in yesterday’s Miami Herald disclose how innovative associations have become. One way for associations to fight back is a "reverse foreclosure." When the property owner stops paying their mortgage payment, the banks file for foreclosure to protect their interest. Most lenders stop at that step however. They don’t want to be responsible for association fees plus they don’t want distressed properties on their books. It raises their capital requirements.
A reverse mortgage forces the issue. The association files its own foreclosure and takes title to the property. It can’t sell the property because of the bank’s lien, but it can renounce its claim and ask the court to give title to the bank. Then the bank has to pay the fees.
Another tactic that has found success is a blanket receivership which allow associations to attach rent receipts from properties on which the owner is not paying fees. It turns out that they can do this without filing separate suits against individual property owners. They get a judge to award a blanket receivership which allows a court approved representative to attach rental receipts from any non-paying property owner and hand them over to the association.
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Source: Miami Herald
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