Homeowners Association and Condominium Association Foreclosures in South Florida

If only we could be kids for life. Get paid a weekly allowance for completing a list of chores and then spend every penny at the mall on items we probably don’t need. Sadly, many grown-ups in South Florida do the exact same thing; however, they get their “weekly allowance” for going to work. They are no longer purchasing baseball cards, action figures, or anything at Toys R Us. They are now purchasing vehicles they can’t afford, big screen TVs, handbags and shoes. What hasn’t sunk in is that as an adult, family and household expenses (mortgage, HOA, healthcare, daycare, food) should be the #1 priority, and then all toys and vacations should be purchased next.  Although most would agree, many South Floridians live credit card rich. Sounds great, but what happens when reality sinks in and you decided to buy that big screen television to watch the Superbowl as opposed to paying your HOA dues? Beware; your house can be foreclosed on!

“The association has the right to foreclose regardless of whether you are current or not on your mortgage payments”

If you live in a house, townhouse or condominium that is part of a common interest community in Florida, you are responsible for paying dues and assessments to the homeowners association (HOA) or condominium association (COA). If you do not pay, the HOA or COA will get a lien on your property and foreclose. You might think, “Well I paid my mortgage payment, so nothing will happen to my property.” Wrong. The association has the right to foreclose regardless of whether you are current or not on your mortgage payments.

If you are in the Fort Lauderdale, Miami, or West Palm Beach area and are facing an HOA or COA foreclosure and/or want to offer a settlement to the HOA or COA to become current, contact The Hershey Law Firm, P.A. at (954) 303-9468. We can help protect you from any potential consequences of an HOA or COA foreclosure. 

How does a loan modification affect my credit score?

Most people who attempt a loan modification are homeowners who are already delinquent on their payments. One missed mortgage payment will have a negative affect on your credit score. Whether or not a loan modification will affect your credit score depends on the kind of program you are being offered and how the lender reports the account.

Loan modifications, particularly those endorsed by the US Government, such as Home Affordable Modification Program (HAMP), may have no impact at all. These programs include loan-reporting requirements that result in the mortgage continuing to be reported as current and paid in full, if the requirements of the program are met by the homeowner.

“If the account is reported as anything other than “paid on time” and “in full” it will have a negative impact on your credit score.”

Other “loan modifications” could hurt your credit score because they are actually debt settlements. Three pieces of information associated with the loan modification affect your score:

(1)   Credit inquiry

(2)   Change to the loan balance

(3)   Changes to the term of the loan

If the account is reported as anything other than “paid on time” and "in full" it will have a negative impact on your credit score. If it is reported as a “new” loan, your score could still be affected by the inquiry, balance, and terms of the loan- along with the additional impact of a new “open date”. A new or recent open date typically indicates that it is new credit obligation, and as a result, can impact the score more than if the terms of the existing loan are simply changed.

Before entering a “loan modification” in Fort Lauderdale or Miami, be sure to have an experienced South Florida loan modification attorney carefully review the terms of the modification and understand how your payment history will be reported.

 For more information on how to protect yourself from the consequences of a loan        modification,  contact The Hershey Law Firm, P.A. at (954) 303-9468.

First Is the Worst, Second Is the Best, Third is the One With…? Lien Priority in Foreclosure Actions

You are at the department store getting ready to walk into the checkout lane, when a pair of shiny sunglasses lined up near the checkout line catch your eye.  You spend the next 45 seconds debating whether you need a 3rd pair of sunglasses that you will eventually lose. You decide you don’t need them, look up, and see a line 5 people deep waiting to check out.  When you got there, there was no line. Although you were first, you will have to go to the back of the line. In this case, “first come, first served” does not apply.  

“Typically, the matter of priority comes up in foreclosure actions because if a senior lien holder forecloses, it wipes out any junior liens.”

The concept of “first come, first served” is very important when it comes to lien priority.  A lien is a claim on residential or commercial property for certain legal obligations of the owner. These obligations can vary, from unpaid charges for maintenance and improvements, to outstanding balances on mortgage loans and taxes.  A valid lien must be satisfied either by full payment of the obligation or by satisfaction when the property is sold.

Generally, lien priority is determined by the recording date of the lien. The general rule is first in time, first in priority. Some liens, such as property tax liens, have automatic superiority over essentially all prior liens. Typically, the matter of priority comes up in foreclosure actions because if a senior lien holder forecloses, it wipes out any junior liens. However, if a junior lien holder forecloses, its foreclosure is subject to the senior lien.

If you fail to make your homeowner’s association (HOA) payments, the HOA has the right to file a lien against the property. The HOA (lien) foreclosure will wipe out any liens recorded after it was recorded in the public records (possibly a second mortgage). All liens recorded prior to the HOA lien will survive.  Keep in mind the first mortgage will not be extinguished from an HOA foreclosure.

If you have stopped paying your HOA dues and are facing an HOA foreclosure in Miami-Dade, Broward, or Palm Beach County contact The Hershey Law Firm, P.A. at (954) 303-9468 to help protect you from any potential consequences. 

A Deficiency Judgment --No Big Deal…Said No One Ever!

So you’ve stopped paying your mortgage. You now have the fear that the bank will take your home. To top it all, there is a chance you may owe the bank money after they take your home from you.

If your house is sold in a foreclosure sale or a short sale, the property will be sold for less than what is owed to the bank. Since Florida is a recourse state, it allows lenders to seek deficiency judgments for unsatisfied debts. For instance, you owe $100,000 on your mortgage and the property is sold for $75,000. The lender/bank can obtain a deficiency judgment against you for $25,000, and you would be required to pay that money to the bank.

A deficiency judgment may be avoided if the borrower negotiated that the bank/lender will waive any rights to a deficiency, prior to a short sale.  If not, the borrower is still vulnerable to a deficiency judgment.

“Since Florida is a recourse state, it allows lenders to seek deficiency judgments for unsatisfied debts.”

The Florida Foreclosure Act

On June 7, 2013, Governor Rick Scott signed HB 87, The Florida Foreclosure Act into law. The act makes significant changes to how residential foreclosures and short sales must be conducted in Florida.

A major change to the process is the change in the Statute of Limitations (SOL) for bringing actions for deficiency judgments. A SOL is the time frame within which a person may bring a lawsuit. If a lawsuit is brought outside of that time period, the suit may be dismissed, as the claim is forever barred.

Before the Act was passed, the SOL allowed a party to bring an action for a deficiency judgment at any point up to five (5) years from the date of the certificate sale was issued by the Clerk of Court, following the foreclosure sale. Now, the time frame has decreased to one (1) year for deficiencies created by foreclosure sales and deed in lieu (not short sale).  Please note, this change is limited to actions commenced on or after July 1, 2013.

Benefit to Homeowners  Whose Actions Started Before July 1, 2013.

Although they are still subject to the old statute of five (5) years, there is a wrinkle. Any action put into motion before July 1, 2013 only remains valid until July 1, 2014.  For example, if the five (5) year time period will expire after July 1, 2014 under the old law, the new law shortens the lender’s right to pursue a deficiency judgment to July 1, 2014.

What about Short Sales?

The bill does not directly address the SOL, but it can be construed under the one (1) year threshold. Furthermore, if it is an owner occupied residential dwelling, the recoverable amount is limited to the difference between the remaining debt from the short sale and the fair market value of the property at the time of the sale.

If you are facing foreclosure ,consult with an experienced real estate attorney in South Florida to protect you from any potential consequences. Contact The Hershey Law Firm, P.A. at (954)303-9468 for your free consultation.