Community Association Collections Crisis Worsens

In the past few months, a huge issue has arisen that needs to be properly dealt with by community associations.

What to do about lender foreclosures?

This post examines the ways to handle the position of the association in such actions.

When a mortgage foreclosure is filed and served, the vast majority of the properties have no equity. On sale, the association will not get paid and its' lien will be wiped out. The ability to obtain a money judgment is available either as part of the foreclosure as a cross claim for damages, or down the road in a Small Claims Court action.

On defense of mortgage foreclosures I notice that some lawyers file a claim, and incurs the expense of a process server and charges the association for the legal fees and costs. I think this is a gross waste of time and money to get a money judgment against someone who is letting a $300,000 asset be taken in th esuit. "You can't get blood from a turnip" is th elegal doctrine here, I believe.....

While this is legally proper, in the short term, I think it is only $$$ in the pocket of the lawyer doing the work. While it may end up with a judgment in favor of the association that is good for 20 years (must be renewed periodically during that time) and may someday be paid off, the association has paid a heck of a lot of money relative to the claim for a piece of paper (the judgment) that may never be collected upon. The reason for my conclusion is that the present value of the money probably never works in favor of the association.

When I defend foreclosures, I do not do counterclaims for that reason; I think it is throwing good money after bad. It's not a situation where one approach is "proper" and one is "improper" it's just that associations are under siege and I see no benefit in charging hundreds of dollars in the context of defending and counterclaiming in a first mortgage foreclosure, with the hope that the amount due will be collected some time in the next 20 years....I answer the complaint and monitor it until the CT is issued.

More later on an aggressive approach in these turbulent times.