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Old 02-04-2009, 02:00 PM
 
1 posts, read 12,870 times
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Default HOA Foreclosure Questions

Recently at a business social I met a man who said he made a living buying HOA foreclosures. He said he bought HOA foreclosure homes at auction, then immediatly phoned the bank notifying them of his purchase and they turned around and cut him a check for 25% of the mortgage value. Is this true? I thought the property owner had a right to reclaim the property prior to 180 days as long as they paid HOA fees, attorney fees and reimburse the auction purchaser. Did I just misunderstand what he was trying to say. Thank you to anyone who replies.

 
Old 02-04-2009, 04:46 PM
 
162 posts, read 387,132 times
Reputation: 110
In Texas, there is no right to redeem property any type foreclosure other than unpaid taxes (for which the redemption period is 2 years).

Texas LawHelp.org - What you need to know about home foreclosure
 
Old 02-05-2009, 10:14 AM
 
1,332 posts, read 1,390,819 times
Reputation: 1226
miokie's comments are not accurate but you need to think twice about buying HOA foreclosed property.

The HOA foreclosure industry in Texas is quite a racket. What happens is that the management company and HOA attorney work to get a "priority of payment" policy adopted in the subdivision. (See, e.g., subdivisions where Alliance Association Management operates). The ability to entangle assessments (for which nonpayment can lead to foreclosure) with other fees (i.e., payable to management company and HOA attorney) is when the extortion racket begins. The hapless resident soon finds himself/herself being accused of "noncompliance" and subjected to fines, late fees, attorney fees, collection fees, handling fees, etc. By re-characterizing your assessment payments against your will, the management company and HOA attorney are able to threaten you with foreclosure until you have paid whatever amounts they deem you owe - to them. These additional payments are all off the books of the HOA which are maintained by the management company.

The Texas Property Owners Protection Act (Tex Prop Code 209.109) purports to prevent this extortion racket, but you have to understand that the TPOPA was authored by Sen John Carona. Carona owns Alliance and many other HOA management companies. In fact he is the owner of the largest empire of HOA management companies in the nation. One of their primary sources of income is this extortion racket and he uses the priority of payment scam to ensure that his alleged "protection" legislation can't impact his business practices. The only thing the legislation protected was unscrupulous business practices by HOA vendors.

A property owner CAN redeem his property within 180 days of the date that the HOA mailed the statutory notice. (see Tx Prop Code 209.011 and 209.010). You'll note that redemption requires payment of all the monies that the "HOA" (i.e., the management company and HOA attorney) claims are owed. A purchaser (other than the original owner) who purchases the HOA property cannot transfer the property to anyone else within the redemption period. So you can't flip it like you planned. Also the senior mortgagee can still foreclose on you unless the foreclosed homeowner is still making their house payment.

During your "ownership" period you will be subjected to the same treatment that the HOA-foreclosed homeowner was subjected to including the priority of payment scam. So you too will face the same threat that the homeowner was faced with.

The racket works really well when homeowners have large equity in their homes. The management company threatens homeowners with the 100% loss of their equity and loss of their home in order to extract money for the benefit of the management company and HOA attorney. In many cases the extortion simply becomes too much to pay. One of those cases televised locally was in Hutto Parke where the homeowner was "assessed" with over $6,000 in attorney fees and the attorneys were threatening to take it to $10,000 if he didn't pay the $6,000. The $6,000 was allegedly due to collection efforts on a $360 HOA assessment. No legitimate business would spend $6K-$10K trying to collect $360. Those costs are off the books of the HOA and are not incurred by the HOA. The HOA attorney gets the HOA's right to collect and then uses the priority of payment to ensure that the man's attempts to pay his assessments are diverted into the accounts of the HOA management company and attorney. The management company takes in the money, applies it to things other than the assessment, and then proclaims the owner a "deadbeat" to the HOA members. The HOA attorney can generally make up whatever amounts he desires and his payment is secured by the equity in the owner's home. You'll note that the redemption statute simply requires you to pay the alleged amounts - you can't question the validity of the debt.

By the way, the HOA management company's management agreement typically allows it the right to "negotiate debt" allegedly on behalf of the HOA. You should not be surprised to find a relationship between the people "successfully" purchasing these HOA foreclosures and the management company/attorney.

This shakedown is institutionalized in these HOA neighborhoods. There are some places that are so corrupt, they are little more than foreclosure mills. If you buy such a property, your ownership will be short-lived because of the senior mortgage holder. You also cannot transfer for at least 6 months AND you are a sitting duck for the management company to do the same thing to you that it did to the prior owner. If you look at the statutory scheme, it was designed to benefit neither the HOA nor the hapless homeowner - only the management company and the HOA attorney vendors.

Last edited by IC_deLight; 02-05-2009 at 10:47 AM..
 
Old 02-05-2009, 10:48 AM
 
Location: Austin, TX
6,822 posts, read 10,501,172 times
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Quote:
Originally Posted by IC_deLight View Post
A property owner CAN redeem his property within 180 days of the date that the HOA mailed the statutory notice. (see Tx Prop Code 209.011 and 209.010). You'll note that redemption requires payment of all the monies that the "HOA" (i.e., the management company and HOA attorney) claims are owed. A purchaser (other than the original owner) who purchases the HOA property cannot transfer the property to anyone else within the redemption period. So you can't flip it like you planned. Also the senior mortgagee can still foreclose on you unless the foreclosed homeowner is still making their house payment.
I don't think you could flip it anyway -- if you are buying an HOA foreclosed property with a mortgage lien still on it, you'll never qualify for title insurance. So no bank will lend on it (of course, you have to buy in cash at the auction anyway)... and no bank will lend to any potential buyer. So you are stuck with a rental property, at best, if your shakedown of the bank doesn't work. Plus, the bank isn't giving you 25% (or whatever they give you) just for your efforts... they will want your lien off. So whatever you spent in the auction, you better make sure your entire amount paid is less than the 25% or so you want to get from the mortgage bank. Not to mention tying up a significant amount of capital, your time, legal fees, and the new HOA fees you will then be responsible for.

I think you could technically make money this way, but it's not easy, and I'm sure there are plenty of sharks trying to compete with you...

Last edited by atxcio; 02-05-2009 at 10:57 AM..
 
Old 07-02-2010, 01:04 PM
 
1 posts, read 9,134 times
Reputation: 10
Does the purchase money lender actually have the right to foreclose on someone who purchases an HOA foreclosure?

The HOA covenants run with the land and it appears under TPC209.011 that the lienholder must redeem within 180 days of written notice of the sale.
 
Old 07-02-2010, 02:06 PM
 
Location: Austin
551 posts, read 869,838 times
Reputation: 177
Can the HOA even foreclose (and sell) a property if the bank still holds the mortgage?

I was thinking that one way a person could protect themselves, from the HOA stealing their home, was to insure that they did not acquire too much equity in the property.

Anyway, I am not buying into an HOA, but there are deed restrictions where the MUD has some level of authority. I need to make sure that authority does not include foreclosure.

I did once go into a depression, where I did not open any mail and ignored bills for a few months. I would hate to think of the loss of a piece of property, that is worth over $100000, as a consequence for not paying attention for a few months.
 
Old 07-02-2010, 04:42 PM
 
1,332 posts, read 1,390,819 times
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Quote:
Originally Posted by eileenkeeney View Post
Can the HOA even foreclose (and sell) a property if the bank still holds the mortgage?

I was thinking that one way a person could protect themselves, from the HOA stealing their home, was to insure that they did not acquire too much equity in the property.

Anyway, I am not buying into an HOA, but there are deed restrictions where the MUD has some level of authority. I need to make sure that authority does not include foreclosure.

I did once go into a depression, where I did not open any mail and ignored bills for a few months. I would hate to think of the loss of a piece of property, that is worth over $100000, as a consequence for not paying attention for a few months.
You are absolutely correct eileenkeeney. In fact, the HOA industry of HOA attorneys and HOA management companies tends to target homes with larger amounts of equity in them.

As to the foreclosure power, the HOA corporation can divest the homeowner of his ownership of the home even though the HOA itself can be divested of ownership by a more senior lienholder.

In this state, a lender's lien is senior to the HOA "lien". Thus if a lender forecloses, it can foreclose and divest any junior lienholder of any interest in the property. If the lender forecloses, the lender forecloses on the HOA's interest in the property - at least as to any amounts accrued up to the date of foreclosure. The lender will be liable, however, for assessments, etc. after that date. This is one reason why lenders have held off on foreclosing in many areas of the country - like Florida.

Although we have been taught that our homes are "safe" and that we can invest in them due to homestead laws, this is actually not true for HOA burdened property - at least until a 1987 Texas court case is revisited and examined a bit more critically. To protect yourself you should invest as little as possible in HOA-burdened or even condominium association burdened property. It's not a great "investment" strategy but then neither is buying a home burdened by an HOA to begin with. However, it is a loss avoidance strategy and also serves as a natural defense against the HOA predators. They have less financial interest in divesting you of your home because there is little equity to take from you.
 
Old 07-04-2010, 10:46 PM
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Location: San Antonio
14,479 posts, read 20,806,948 times
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Closing this thread. As I've posted previously, we're taking a break from discussing HOAs in this forum for a few weeks. Being new to this forum, david4968 had no way of knowing that this hot-button topic was off-limits here.

I'd appreciate it if members would report the post ASAP the next time an HOA thread gets opened or bumped, rather than replying to the thread. I'll let you know when the topic is OK to discuss again.
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