HOAs Foreclose On Big Banks

South Florida homeowner associations are foreclosing on some of the nation\’s largest banks, accusing the lenders of failing to pay thousands of dollars in maintenance fees on repossessed properties.

The foreclosure filings are a growing trend as associations become more aggressive in going after delinquent fees that have crippled HOA budgets during the housing bust.

Banks owe a portion of the past-due maintenance fees and the full amount from the date they take title to the property, attorneys said. If the lenders fall behind, they\’re subject to foreclosure just as an individual owner would be.

In one Broward County case, Deutsche Bank didn\’t pay maintenance fees for nearly three years on a townhome it repossessed in September 2009 at the Southbridge development in Pembroke Pines, said Ben Solomon, a lawyer for the association.

The Southbridge HOA filed for foreclosure against Deutsche Bank last year. The bank finally paid $25,553 in June — and only then because it had to convey clear title to another buyer, Solomon said.

\”They expect payment from their customers, but once they become our customers, they don\’t want to pay us,\” said Marc Lebron, treasurer of the Southbridge HOA. \”It\’s ironic, isn\’t it?\”

Solomon is representing dozens of other South Florida homeowner associations that have filed foreclosures against Deutsche Bank, JPMOrgan Chase, Citibank and others. He expects more than 100 similar cases to be filed by the end of the year.

Deutsche Bank contends that it\’s only a trustee for the legal owner, investors of mortgage-backed securities. The loan servicer — a separate company that collects payments from borrowers — is legally responsible for paying the HOAs, said Duncan King, a spokesman for Deutsche Bank.

\”We don\’t own,\” King said. \”We are the trustee. We don\’t have an economic interest in the property.\”

A spokeswoman for the servicer, Homeward Residential, said Southbridge tried to collect more maintenance fees than Florida law allows. The case also was delayed because of documentation the HOA required, the spokeswoman said.

Donna DiMaggio Berger, a Fort Lauderdale lawyer who represents community associations, said banks are trying to be \”clever and creative\” to delay or avoid paying.

\”They\’re on the hook,\” she said. \”They made the loan. They\’re going to be held responsible.\”

Anthony DiMarco, executive vice president of government affairs for the Florida Bankers Association, said he\’s not aware of banks not paying maintenance fees on foreclosed properties.

Two months ago, the Sun Sentinel published a three-part series detailing how big banks are neglecting to maintain foreclosed homes, all the while claiming they aren\’t responsible for the properties.

Banks and homeowner associations have been at odds since the housing collapse.

The HOA boards said banks were slow to take title to foreclosed homes to avoid paying assessments. The lenders said they shouldn\’t have to pay until the foreclosures are completed.

Now some banks aren\’t paying even after they take title, lawyers say. Berger said she plans to address what she calls the banks\’ worsening behavior at next year\’s legislative session.

Solomon said lenders often remain delinquent while they market the home for sale to a third party. Once those deals are completed, the banks pay what\’s owed out of the proceeds of the sale rather than fulfill the legal requirement of paying each month.

\”Every association needs to pursue delinquent owners, banks or otherwise,\” he said.

In another case, he said, JPMorgan Chase hasn\’t paid the Keys Gate Condominium Association inMiami-Dade County for more than two years after it foreclosed on a condominium there.

Keys Gate filed for foreclosure against the bank, saying it owes nearly $20,000 in fees. JPMorgan failed to respond, and the association entered a default against the bank and is awaiting a judge\’s ruling, Solomon said.

Maribel Ferrer, a spokeswoman for JPMorgan, wrote in an email that the bank \”was not made aware of\” delinquent fees but is now \”working to immediately address the issue.\”

Many of the 50,000 homeowner associations in Florida were devastated financially during the housing downturn when owners stopped paying maintenance fees after their units fell into foreclosure. The fees allow the associations to pay for services and amenities.

In most cases, fees collected from homeowners are the only source of income for HOA boards.

Lebron, the Southbridge treasurer, said owners in his development are paying about $260 a month. He estimates the fees would be 25 percent lower if the association didn\’t face so many delinquencies.

Don Gonzales, an elected delegate for the Keys Gate association, said his development has had to cut security and raise fees because the banks and other owners aren\’t paying.

\”They\’re banks. They have money,\” he said. \”It\’s so unfair. How dare they. Not paying their dues affects all of us.\”

Ken Thomas, an independent banking analyst in Miami, said the issue appears to be a matter of \”gray-area banking\” in which lenders are leveraging their considerable power.

\”Those who have the gold make the rules,\” Thomas said. \”Many times we see bankers make their own rules.\”


Source:  Sun-Sentinel

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