Bank of America, JP Morgan Chase and other lenders have recently called for a halt on foreclosures amidst allegations that they submitted improper and, in some cases, fraudulent paperwork to push through their foreclosures.
It is a well known fact that homeowners delinquent in the payment of their mortgage are more likely than not also delinquent in the payment of their assessment fees. Therefore, the delay in the filing and conclusion of public trustee foreclosures in Colorado will inevitably result in greater delinquencies for associations.
Although there is little that an association can do to rush a bank through the foreclosure process, the association can take steps to minimize losses resulting from the delayed foreclosure filings. First, the association should make sure that it is acting as diligently as possible, in accordance with its governing documents and collection policy, to collect outstanding debt against its delinquent owners. It is much easier to collect or negotiate repayment of a debt with financially distressed homeowners while it is still manageable.
Next, if a unit is vacant or tenant occupied, the association should consider a receivership lawsuit to collect rental income from the property. Although a property in receivership may ultimately end up in foreclosure, the association is entitled to collect rental income from the property until such time as the public trustee foreclosure has concluded. Being proactive by initiating the receivership lawsuit prior to the commencement of a public trustee foreclosure, assists the receiver in locating a tenant who will sign a term lease that provides for a larger rental payment.
Finally, in certain circumstances the association should consider filing a judicial foreclosure of its lien(s). This is particularly the case with associations whose assessment fees are high and that stand to lose a substantial amount of assessment income resulting from the foreclosure delays.
If you would like to discuss whether a receivership or foreclosure lawsuit may be appropriate for your association, please contact us at (303) 863-1870.