Is the HOA priority lien necessary and beneficial?

As we await the outcome of contradictory rulings on the Constitutionality of the HOA priority liens, I am reposting the following blog as a reminder of what is at stake for property owners, buyers, investors, and mortgage lenders.

Independent American Communities

By Deborah Goonan, Independent American Communities

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A hot-button issue involving Association Governed Housing – homeowners associations, condominium associations, and cooperative associations – is priority lien status. Currently 22 states, the District of Columbia and Puerto Rico have assessment priority lien statutes. (See the list of states at the end of this article.)

The case for priority liens – the industry perspective

Community Associations Institute (CAI) makes its case for priority lien status of “community associations” in its official Public Policy: (emphasis added)

In order to recover their losses, lenders and associations attach liens to the property and compete in a foreclosure sale for the debts owed. Generally, liens are prioritized by the common law principle, “first in time, first in right.” Under this principle, the mortgage lender who properly records a mortgage always has priority over any association claim. When foreclosure proceedings are instituted, mortgagees are typically always winning bidders…

View original post 3,132 more words

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2 Replies to “Is the HOA priority lien necessary and beneficial?”

  1. My HOA is SCA in Henderson, NV and it is one that promoted and uses the priority lien. Our Board of Directors and the Management were gungho to pass it and get some unfortunate peoples homes for peanuts. Then we have to put up with homes without mowed lawns and without trimmed bushes and — well you know what happens with empty homes.

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  2. My response/opinion to this question:

    This article is well worth the reading, when it comes to HOA’s priority lien prelude to Foreclosures over a bank mortgage lender. Let’s get one thing clear, once the HOA decided to sells those lien/past due assessments the HOA in fact only receives a fraction of what they are truly worth still leaving the HOA in the red or a quick fix that again still leaves the HOA’s again scrambling for money. But until this State of Florida lawmakers start to realize it hurts every homeowner that is paying or not. In turn the homeowners who do pay may see increase in their HOA’s assessments (dues) just to cover for those who do not.

    So the question is valid one. The only people/companies that this helps of course is collection and attorney, and investment companies who make a living off of buying up past due HOA accounts and some say that management companies that run these HOA’s do get kick backs on those sells. This is why CAI (Community Association Institute) pushing your state lawmakers to further their way of living that can be off of your back. I am a strong supporter for Cap Rates to where these investor/attorneys/collection and investors companies can no longer make huge profits as long as they have that ability of course that being (HOA Industry) have no incentive to work with the homeowners to pay back and get caught up. That home is worth far more than paying or getting their HOA fees back in line thus the reason all HOA’s have such a huge inventory of foreclosures.

    Before long, Mortgage Company will no longer lend money to buyers to get a home in an HOA due to “High Risk Factor” for the mortgage company. I still say, maybe it time that mortgage companies start to roll those HOA assessment into your mortgage payments like they do with property taxes and home insurance guess what their goes the HOA industries ability to make a living off of past due hoa assessments.

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