February 13, 2009
If Nothing Else It Should Continue To Distort Those Foreclosure Stats
"Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley agreed to suspend foreclosures until next month and signaled a readiness to help the Obama administration craft a housing plan to modify mortgages for troubled borrowers."
∙ Citigroup, JPMorgan, Morgan Stanley Halt Foreclosures [Bloomberg]
First Published: February 13, 2009 10:00 AM
Comments from "Plugged In" Readers
Moratoriums contribute to the problem for condo buildings because it allows defaulting owners to not pay HOA dues for that much longer. That adds financial stress to the building's balance sheet potentially leading to special assessments or signficantly higher dues for others. That then pushes other owners to the financial brink causing even more defaults. And HOA's will be forced to to foreclose on those owners whether their lenders have a moratorium or not, and every foreclosure is a new comps dragging values down further. "house of cards" indeed. Within SF this will largely be a SOMA/SB/MB's problem that is likely to crush all of the newer (post '03 or '04) buildings where 100% of the owners under water.
Moratoriums may be good for single family homes, but watch out when walking among the high-rises... they are coming down... and not by 15% on places over priced by 30% to start with.
Posted by: sfrob at February 13, 2009 5:04 PM
Never heard of an HOA foreclsing on a unit. Is this really possible? If so, how? And doesn't the bank get its money first with any future sale?
Posted by: anoanon at February 13, 2009 5:25 PM
The HOA can put a lien on your unit for unpaid dues (and occasionally other infractions).
Posted by: Po Hill Jeff at February 13, 2009 5:35 PM
With an under water owner there is no equity to pay back the past due HOA dues. So the only advantage is getting a new owner in sooner who is paying. But yes, my laymen's understanding is that the HOA can sue the owner, get a lien, and force foreclosure. Any attorney's want to weigh in?
Posted by: sfrob at February 13, 2009 5:37 PM
This may be strategic. Perhaps they think they can unload these assets through RTC 2 with less effort and loss.
Posted by: Mole Man at February 13, 2009 6:57 PM
You've got it right, sfrob. In fact, I think that under a typical HOA agreement the HOA can place a lien on a unit where dues are delinquent without even having to sue first. It would have to commence a lawsuit to enforce the lien through a forced sale. And the HOA lien would be inferior to the mortgage, so on an underwater unit there would be no point -- but a HOA generally could also go after other assets of the owner beyond equity in the unit. So if an owner is in trouble, pay the HOA before the bank (the latter generally cannot come after assets other than the unit).
Posted by: trip at February 14, 2009 9:16 AM
if the HOA puts a lien on the unit, and the owner has 0 equity and then forecloses (in the eventual lift of the moratoriums), can the HOA not collect the HOA fees owed upon the sale of the unit from the bank to the new owner?
Posted by: condoshopper at February 14, 2009 2:04 PM
HOA liens are considered senior to the mortgage, as are IRS and municipal tax liens. These liens would need to be paid off by the bank to clear title, should they foreclose on the unit.
If the lien is not satisfied, the HOA can trigger the foreclosure process. The bank, in a junior position, normally swoops in at this point and pays the lien to protect their interests. This is becoming a much more frequent, as HOAs get desperate for money and push the issue.
Posted by: shark at February 15, 2009 8:08 AM