With record numbers of foreclosures nationwide, homeowner associations are being forced to cut back on services. Banks have been dragging their feet to iniate the foreclosure process because they will be responsible for delinquent association dues and property taxes. This has left thousands of communities holding the bag, either putting the burden on other homeowners in the community or by cutting amenities.
To combat the banks, a Miami Beach law firm has come up with a strategy, called the Mortgage Terminator, where homeowner associations can force nonpaying lender-owners to either take ownership and pay deliquencies or give up their ownership interest so the association can take title to the property and sell it. The ploy won't solve all an association's money woes, but it will at least force a lender's hands after an association forecloses on an owner to collect unpaid assessments.
In too many cases, lenders are failing to foreclose on troubled assets, regardless of whether the owner is a troubled borrower or a secondary lien holder. Banks are either waiting for the market to clear so they can sell the distressed assets at a better price, or they don't want to pay the dues and/or assessments required from owners.
Whatever the reason, lenders that are stalling are leaving associations in the lurch. But with the Mortgage Terminator maneuver, associations can take the title to the property and then force the primary lien holder to initiate its own foreclosure proceeding or release its mortgage so the association can sell the unit to cover what it is owed.
Three times now, Florida courts have upheld the tactic, which finanlly gives homeowner associations a strategy that finally gives banks a legal ultimatum. For the full article, click here.
