Homeowner Association Liens Might be More Valuable Than Anyone Realizes

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Funny how things come full circle. Back in the 1970’s, 80’s and early 90’s I was heavily involved in representing hundreds of associations for homeowners — condominium, cooperative, and homeowner associations. I litigated everything from recreation leases, construction defects, to liens for unpaid assessments or maintenance expenses. I published several articles and conducted a number of seminars on the subjects affecting these associations. Back then the liens were simple and there were issues between associations and lenders, but they were usually easily resolved.

So I get a call from someone in Florida whose parent owned a condominium apartment in a condo I represented back when I did that sort of thing. It turns out he owns the property that his parents once occupied and he has been following my blog with great interest for a while now. And his main question was “If we can agree that the lien of the association is a valid enforceable lien, then is it possible that the defects in what appear to be liens and encumbrances with higher priority could put the Association in first position?”

BAM! I was an expert witness on condominium and homeowner association law, an experienced litigator of all sorts of issues for these associations, and even had a “foreclosure mill” of my own, that enforced the liens and collected the money due, since it was rarely the case than anyone would let the property go just for unpaid assessments. But it had never occurred to me that in many if not most cases, the current round of fake securitized mortgages was sitting behind a valid lien from the association.

To make a long story short,”Yes,” I replied, “if the initial mortgage is defective or defects were introduced into the chain after the closing with the homeowner, then a properly filed and duly executed lien by the association would be sitting in either first position, or a position in which they could claim first position. This would greatly increase the likelihood of earlier and full payment of all outstanding liens, together with costs, and attorney fees and interest.”

The ramifications of this epiphany are enormous. Most of the new construction in recent years has been subject to governance by enabling documents creating an association that has the powers of assessment, rule enforcement, hiring contractors for common areas, hiring lawyers etc. Most of these associations are looking at much higher percentages of people who are not paying the assessments and not paying off the lien because they are already underwater. Or more correctly, perhaps we should say that they THINK they are underwater because they THINK that the mortgage is a valid recorded instrument that is enforceable. Most likely they are wrong and that is the message of this blog — to get people to stop and think before they abandon the most valuable asset in their lives — and now to stop associations from ignoring the value of their liens.

Most associations are looking at these liens as less than worthless. Some of them are not even bothering to file the liens. But if they foreclose on their lien, they could name the mortgage holder of record as a junior or non-existent lienholder because the lender of record is no longer due any money or never was dude any money depending upon whether they originated the loan with their own money or credit, or if they were simply the typical straw-man sitting in as a fee paid performer to look like a lender but act like one.

As we have seen in more and more cases, when institutional plaintiffs (associations included) make the same allegations as borrowers are making in the courts they are taken far more seriously by the Judges. Proactive associations  could therefore go after these liens aggressively and do a favor for everyone — except the banks who have no money in the deal anyway.

By knocking out the pretender lenders as an institutional plaintiff representing dozens, hundreds of even thousands of homeowners whose assessments will be effected by the non-payment by other homeowners, the Association clears an easy path for collection in full, and for the homeowner to retain the property and live in it, thus avoiding the future problem of a ghost town or half empty association where there is not enough money or resources to get the job done of running and maintaining the condominium, coop, or homeowner association. What these associations need is for their lawyers to get up to speed on securitized loans, get securitization searches like the one we offer (see link next to my picture) and file against the banks, who, in my opinion, will fall like dominoes, settling the claims of the association with payment in full.

Whether you go all the way through foreclosure or you settle with the pretender lender, the property owner (homeowner) will have the path cleared for him to make the same allegations, but this time with greater weight than is currently received in courts around the country.

Tags: apartments, association liens, borrower, condominium, condominium association, coop, cooperative, cooperative association, creditor, foreclosure, foreclosure offense, fraud, homeowner association, homes, MERS, securitization, TILA audit, townhouses, trustee
Posted in bubble, Corruption, Eviction, securities fraud |