12 September 2007
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!Read More »
HOA Extortion
By Gina GardnerNFNS Columnist
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!
I feel his pain. I had a beef with my homeowner's association because I was paying $200 a month and the management company was supposed to take care of snow removal. Well, they didn't, and I ended up paying a towing guy to winch my car through the snow and into the street so I could get to work. I deducted the costs from my next HOA dues check, and the fun began. The threatening letters began showing up. I wrote back, telling them to pound sand (only not that nicely). I sent my checks in for subsequent months and they returned them, saying I had to send the full amount that I "owed" them. Eventually I got a notice that they were initiating foreclosure proceedings, saying I owed them all this money (the original dispute was less than $100), and they had added all these late charges and exorbitant lawyer's fees, etc. Basically they were holding my condo hostage and I ended up paying a huge "ransom" to get it back.
The process, called non-judicial foreclosure, is used and abused by homeowner's associations all over the country. There are even lawyers out there who advise the HOAs on how best to steal your property and force you into foreclosure! Here's an example: Hunter Law. Finally, the media and public began pressuring politicians to curb the excesses of the HOAs and protective legislation has been proposed or enacted in several states. See this Realty Times article for more information about the abuse of homeowner associations and legislative efforts to stop it. Realty Times
Now, what can you do as a homeowner to prevent non-judicial foreclosure? First, pay your dues even if you have a problem with your association. Had I been smart, I would have paid my full dues and sued them in small claims court for my towing cost and avoided foreclosure threats. Second, if you find yourself in a foreclosure proceeding with your HOA you may have a right to arbitration by a third party, or a right of redemption, which allows you to buy your home back–check with a lawyer in your state. Finally, if you find yourself unable to pay your dues, a timely cash-out refinance or home equity loan may get you the cash you need to pay your dues and avoid foreclosure. The worst thing you can do is get into a pissing contest with your HOA–it's like trying to fight city hall.
About the Author
Gina Gardner writes for an online media company specializing in mortgage and business issues. Her career highlights include auditing and tax with Deloitte, systems consulting with Experian, and loan consulting with Centex. She earned her degree in Financial Management from the University of Nevada.