Is outsourcing assessment collections the answer to community’s financial woes?
By Deborah Goonan, Independent American Communities
Updated October 1, 2018
Poinciana’s city-sized master homeowners’ association, Association of Poinciana Villages (APV), has been struggling to catch up with its expenses for at least the past decade. The downward spiral began with the last great recession, when thousands of the community’s working class homeowners lost their jobs and fell behind on their monthly HOA assessment obligations.
APV transitioned from in-house management to First Service Residential in 2013.
In recent years, according to local reports, APV, in conjunction with FSR, decided to outsource its HOA collections services to several different private companies. But doing so has failed to reduce Poinciana’s budget shortfall.
In recent years, the community has seen a decline in its park maintenance services, as well as community security.
According to a recent report in The Ledger, APV estimates 3,000 delinquent accounts out of some 27,000 properties. But Village 5 board member Victor Destremps estimates that close to 4,000 accounts are behind on their HOA payments.
Debts pile up for Poinciana residents
By Mike Ferguson The Ledger
Posted Sep 19, 2018 at 8:47 PM
Updated Sep 20, 2018 at 8:30 AM
POINCIANA — More than 10 percent of the homeowners who make up the Association of Poinciana Villages are delinquent with association dues and the homeowners say they’re not sure where to go from here.
The Association of Poinciana Villages (APV) is a homeowners’ association of about 27,000 homes that spans parts of Polk and Osceola counties. According to a spokeswoman for APV, more than 3,000 accounts are delinquent.
Residents have until Jan. 15 each year to pay at least the monthly amount of $23 or the annual amount of $276 — an increase of $24 from the previous year. If those are not paid, they’re sent to collections, which residents say creates enormous debts. Often, they’re unable to find who to pay.
Carlos Pastor said that his debt now stands at more than $3,500. Pastor said he was sent a letter by APV that his outstanding dues had been passed on to collections and was charged about $300 for the letter to be sent.
Pastor said he tried to pay the outstanding balance, but the HOA wouldn’t accept it. He claims to have tried to pay the collections company, McCabe Law Group, via mail, but it claimed to have never received the payment. Pastor said he had lived at his home since 2000 without ever being late until 2016.
According to an email from an APV spokeswoman, the HOA did collections in-house prior to 2013, but practices changed because delinquency rates were high and the in-house system was “ineffective.” Victor Destremps, who represents Village Five on the APV master board, said he was told during the August board meeting that the number of delinquent accounts was closer to 4,000.
“I tried to get them to keep collections in-house,” Destremps said. “They’ve tried to eliminate monthly payments in a community where a lot of people are on fixed incomes. People shouldn’t lose their house over $500. They’re taking people to court, getting liens and trying to foreclose on properties.”
According to APV, only one property has been foreclosed on so far. APV confirmed that once dues are sent to collection, assessments no longer come from the HOA but from the debt management companies. Axiom, OMNI Collections and Prime are the three companies used for collection.
The dirty little secret about HOA debt collections
Why have collections efforts failed to lift APV out of its persistent budget deficit?
Readers need to understand that the HOA collections process is often designed to benefit the collections agents and attorneys, not the association.
As long as HOA collections remains in-house, owners who fail to pay their assessments on time are subject late fees and reasonable interest. While these penalties certainly add to the overall cost of repayment, late fees and interest charges are limited by state law.
If an association works with the delinquent homeowner, it’s often possible to negotiate a reasonable monthly payment plan, allowing the member to catch up and avoid having a lien filed against the property. Money collected during the in-house process goes directly to the HOA.
But once the Association makes the decision to send an account to collections, the agency starts to add on costly collection and attorney fees. And because state laws do not cap the amount of these service fees, they can quickly spiral out of control. It’s not uncommon for collection costs and attorney fees to far exceed the amount of the actual debt — plus late fees and interest.
Fees added through collections services can be double, triple, and even up to ten times the amount of the actual debt owed to the association governed community.
In many cases, the HOA attorney or collection service can be quick to file liens — in as little as 60 days — without giving the homeowner a fair opportunity to catch up on their obligations.
If the owner is unable or unwilling to pay an outrageously inflated debt, and can afford to hire an attorney specializing in debt collection and foreclosure law, the matter can be brought before a judge, who might significantly reduce “reasonable” fees and costs billable to the homeowner.
However, most owners don’t understand their rights, nor can they afford to hire an attorney in their defense. Under the threats of negative credit reporting, wage garnishment, and even HOA foreclosure, homeowners may end up borrowing money or selling off personal belongings in order to pay off the liens against their homes. Unfortunately, the lion’s share of that money goes directly to the collections agent or attorney.
When the homeowner is unable to pay their HOA-related debt, their home is at risk for foreclosure as a method of recovering that debt. Investors are often able to pick up bargain-priced properties at HOA foreclosure auctions, leaving the homeowner without a home, and, sometimes, still on the hook for mortgage payments.
Why can’t homeowners afford a few hundred dollars per year?
Some readers may think that $276 per year — $23 per month — is not that much money. But it’s all relative to the financial realities of a household. How much money is being earned at work, or collected from Social Security? How costly are the household’s basic expenses? What are the homeowners paying each month for medical expenses, food, transportation, and child care?
When homeowners are on very tight budgets, any financial emergency can leave them with hard choices at the end of the month. If it comes down to paying for medications, buying food, putting gas in the car, or paying HOA assessments, guess which obligation falls to the bottom of the list.
Indeed, in 2016, Forbes reported that 63% Of Americans Don’t Have Enough Savings To Cover A $500 Emergency. That statistic was based upon research by several credible organizations.
Clearly, piling hundreds or thousands of dollars in fees on top of unpaid HOA assessments helps no one but collection agents and attorneys.