Newsletter - April 2015
HOAs can occasionally be a pain in the rear end for those living within the association's jurisdiction. But more often than not they are usually little organizations that help keep property values and the overall livability of a community up. In terms of power, they don't really have any muscle outside their borders. Right? Certainly nothing to worry about for mortgage bankers. RIGHT???
WRONG. At least, not anymore.
In 22 states, HOAs now have the power to vault their lien (for unpaid fees) to priority status… even ahead of the first mortgage! This type of lien is called a super lien, and they spell D-A-N-G-E-R for your portfolio's value. So I want to give you a quick overview of what these liens are and how to keep them from draining your portfolio.
There are 3 essential points to understand:
1. This is a BIG deal:
Super liens are a real problem lurking out there RIGHT NOW, probably in your portfolio. There are around 350,000 HOAs in the U.S., and around 20% of all homes in those associations are in delinquency. Sperlonga reports that the average hit for the mortgage servicer is $7,300 on a home with a super lien. This is not something you want to put on the backburner.
2. Super Liens Get Priority
I mentioned that in some states HOA liens get priority over even the first mortgage. This is the crux of the whole issue from the standpoint of mortgage professionals and the attorneys that represent them, because here’s the bad news: You can't fight this. You'll lose, and you'll lose big. In a famous court decision in Nevada, US Bank took an $874,000 bath when a $6,000 HOA lien was given priority on the $880,000 property. Ouch.
3. You Need Better Information
The only way to protect your portfolio (and by extension yourself!) from lurking threat of HOA super liens is to know whether or not any of the homes you are servicing belong to an HOA. And once you know that, you need accurate contact information for the HOA, which is not an easy task, due to the informal nature of most associations. Then, you need to know whether or not there are back payments due on the property. All of this takes time and lots of it, so I want you to be aware that Blue Streak Docs can handle this for you...
We can manage your HOA research and find any HOA that can affect your portfolios to ensure you have all the information you need to make smart decisions on your HOA properties and nip any potential issues in the bud. Plus, if you haven't worked with us yet, you can try us out and get your 5th order FREE!
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