What to do when banks don’t foreclose
The financial meltdown in 2008 has caused collection problems for Community Associations. Specifically, banks take their good old time to foreclose on delinquent Association homeowners, leaving years of monthly assessments to be written off. The following are some ways to combat this problem.
Sue the bank
Several Associations have been successful in suing banks to remove their lien on the property due to the banks’ lack of interest in foreclosure. While such a tactic provides a windfall, the Association still must finance the costly legal proceeding. However, if you can find an attorney who will defer the legal fees until the property sells, this option is indeed a viable one.
Take ownership and become a landlord
Another creative way for an Association to recoup its back fees is for the Association to take ownership of the property by either its own foreclosure action or by a deed in lieu of foreclosure and then lease the property. The rental income will quickly reduce the assessment liability. However, if the bank does initiate a foreclosure, your windfall may have a limited duration
In extreme cases where 5% or more of unit owners are in foreclosure, an Association can file for chapter eleven bankruptcy protection and petition the court for assistance in getting banks to quickly foreclose and to start paying monthly assessments.
In summary, banks are mess and they are making a lot of Associations a mess as well. If you wish to mitigate the mess, you must become creative in your thought process and by doing so, you may even create a windfall for your Association.