DO NOT MOVE….I REPEAT….

DO NOT LEAVE YOUR HOME…  UNTIL THE BANK FORECLOSES OR THE SHORT SALE IS COMPLETED 

Every day people come into my office indicating that they moved out of their home many months (or even years ago) and the bank still has not foreclosed.  They are now concerned because the city is sending them bills for maintenance on the property and the Homeowners Association is suing them for back payments even though they are no longer living at the home.  If you are behind on your mortgage, have tried a loan modification and have been denied or know you will not be able to keep the home, what should you do?

First, DO NOT MOVE… I REPEAT…DO NOT MOVE UNTIL THE BANK FORECLOSES OR THE SHORT SALE IS COMPLETED.  You are now living in your home without paying your mortgage.  It is free!  You should not start paying rent someplace else when you can live in your home for free.

Second, KEEP UP THE PROPERTY.  YOU ARE STILL RESPONSIBLE FOR THE PROPERTY UNTIL THE BANK FORECLOSES OR THE SHORT SALE IS COMPLETED.  So, even if you moved, you are still responsible for the maintenance of the property and payment of any Homeowner Association dues.  You do not need to pay the property taxes, but you should maintain the homeowners insurance.  Therefore, if you are still responsible for the maintenance and HOA payment, you might as well enjoy the property and the amenities.

Third, CONTINUE TO TALK TO YOUR LENDER TO SEE IF ANY NEW OPTIONS ARE AVAILABLE TO YOU.  Starting January 1, 2011, the State of California is offering new assistance programs through your lender if you are behind on your mortgage. 

Fourth, SEEK LEGAL COUNSEL.  Depending on your situation, a real estate or bankruptcy attorney will be able to advise you whether a short sale may be a better alternative for you than a foreclosure.  Also, if you have other debt which you are unable to pay off such as credit cards, lines of credit or car loans, a bankruptcy may be the best alternative for you.  However, if  you are no longer in the home, the debt against the property cannot be used to offset income.  Therefore, if you (or your family) have income over the average median income in California (Family 1- $47,234, Family 2-$61,954, Family 3-$67,562), you will want to file the bankruptcy case prior to leaving the home.  Leaving the home prior to the bankruptcy filing may mean the filing of a Chapter 13 repayment plan versus a straight Chapter 7 where no debts must be repaid.

In conclusion, do not move until the Bank forecloses or the short sale is completed.  It is still your home until the bank forecloses which can be months or years from the time you stop paying.  The average time of a foreclose in California is now 451 days from the date of default.  That means potentially 451 days of FREE RENT or more.  Since you are still responsible for the property, you might as well enjoy it.  This is a complicated area of the law.  You are in the deep end of the pool.  Do not swim alone.  The buddy system is essential.  Seek a buddy in legal counsel prior to taking any action.  I see people everyday for a FREE 30 minute consultation in my offices located in Walnut Creek, Antioch and Brentwood.

WE ARE A DEBT RELIEF AGENCY.  WE HELP PEOPLE FILE FOR BANKRUPTCY.  THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UPON IN   MAKING ANY DECISION REGARDING A VOLUNTARY DEFAULT, SHORT SALE, FORECLOSURE OR BANKRUPTCY.  THIS INFORMATION IS NOT A SUBSTITUTE FOR OBTAINING TAX & LEGAL ADVICE REGARDING AN INDIVIDUAL SITUATION.  GRIMESBKLAW.COM

  © 2011 Joan Grimes

Beware of the HOA

Dues, Assessments, Liens and Foreclosures

Last week, a person came into my office saying he received a letter from his Homeowners Association (“HOA”) offering to rent his house to him. Needless to say, he was not happy. He knew he was behind on HOA dues, but his lender hadn't even started foreclosing on his house.

Welcome to the new frontier of the mortgage crisis in California. The homeowner's HOA had foreclosed on his property before the lender. While this has been common in Hawaii for years, this is relatively new in California. If you are behind on your HOA dues or assessment, here is the California law you need to know.

HOAs are regulated by the California Davis-Stirling Common Interest Development Act in Civil Code Section 1367 et seq. Pursuant to Davis-Stirling, an HOA can levy dues and assessments necessary for the development. A regular or special assessment is a debt of the owner. If an owner is behind on dues or assessments, the HOA can record a lien against the property. At least 30 days prior to recording the lien, the HOA is required to notify the owner by certified mail.

The recording of a lien does not automatically allow a foreclosure by the HOA. Rather, an HOA may not foreclose until the amount of the delinquent dues and assessments secured by the lien, exclusive of any accelerated assessments, late charges, fees and costs of collection, attorney's fees, or interest, equals or exceeds one thousand eight hundred dollars ($1,800) or the assessments secured by the lien are more than 12 months delinquent. In addition, the HOA still maintains its rights to proceed in state court against the owner for delinquent dues and assessments.

If the HOA decides to proceed with a foreclosure of its lien, in most instances it will proceed with a non-judicial foreclosure pursuant to CC 2924 which will require the a Notice of Default and Notice of Sale. If the HOA does foreclose on its lien, the owner still has a 90 day right of redemption and the HOA would still be taking the property subject to any senior liens.

Therefore, if you are behind on your HOA dues and assessments, you need to be aware that the HOA can foreclose before your lender and become your landlord. If you are trying to buy the maximum amount of time in your home prior a foreclosure, it may be better to keep your HOA dues current.

If you are filing bankruptcy or have filed bankruptcy, there are special rules you need to know. First, all dues and assessments which come due prior to the date of filing are included in the bankruptcy discharge. HOWEVER, under 11 USC 523(a) (16), Congress carved out a special exception as to post-petition dues and assessments. Specifically, the owner continues to be responsible for all dues and assessments which came due after the filing of the bankruptcy as “long as the debtor or the trustee has a legal, equitable or possessory ownership interest” in the property i.e. until someone forecloses or buys your property, you are responsible for the HOA dues and assessments. Therefore, if you do not pay your HOA dues or assessments after a bankruptcy filing, do not be surprised to find yourself being sued in state court by your HOA or having your property foreclosed.

In conclusion, beware of the HOA. They know where you live. This is a complicated area of the law and I recommend you to seek legal counsel prior to allowing your HOA dues or assessments to become delinquent. Like everything else in life, there are consequences to actions as well as inaction. In this case, there may be personal liability and tax consequences. I provide a free 30 minute consultation at all of my three offices located in Walnut Creek, Antioch and Brentwood.

WE ARE A DEBT RELIEF AGENCY. WE HELP PEOPLE FILE BANKRUPTCY RELIEF UNDER THE BANKRUPTCY CODE. THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UPON IN MAKING ANY DECISION REGARDING A VOLUNTARY DEFAULT, SHORT SALE, FORECLOSURE OR BANKRUPTCY. THIS INFORMATION IS NOT A SUBSTITUTE FOR OBTAINING TAX & LEGAL ADVICE REGARDING AN INDIVIDUAL SITUATION.

© 2011 Joan M. Grimes. Grimesbklaw.com