Hello Hannah:

HOAs may not factor or sell their delinquent assessments accounts to a collection agency--and, frankly, because the assessments are tied to ownership, it would not be worth the collection company's time or efforts to collect a debt of this type. Typically, the HOA will hire a collection attorney and once they know the foreclosure, they will cease any further attempts at collection.

Again, my suggestion is to tell the HOA of the foreclosure and, if need be, consult your local real estate attorney for more information.

Sincerely,
Grace Morioka, SRES, e-Pro, CID Specialist and Consultant
Area Pro Realty

Dear Bad Credit,

Sorry to hear about your situation. The HOA sold the debt to a collection agency. A few things can happen, the collection agency can affect your credit rating, they may have memberships to report to the credit bureaus. Here are your choices.
Do nothing, and either the collection agency will go away eventually or the collection agency will file a lawsuit against you and attempt to prove to a judge that the debt is valid and the judge will either dismiss the claim or allow it. If the collection agency is able to obtain a judgment against you the collection agency will attempt to garnish wages or place liens on other assets that you might have. There is also the statute of limitations issue in the State of California.
With regard to your credit being hammered by the foreclosure, you can obtain a new mortgage in 36 months after your foreclosure, less if you obtain private financing or lease option deals. Here is a link to my website and I am happy to send you my free e-book on returning to homeownership after a foreclosure. Good luck!

Hello Bad Credit and thanks for your question.

California's laws do not allow any homeowners association to file what is called a "super lien" that survives a foreclosure action. Super liens are available in other states, such as New York and Florida, but not in California. As a result, even a judicial foreclosure commenced by the homeowners association against the unit takes a "back seat" to a foreclosure action of the first lien holder--the mortgage company.

Unfortunately, homeowners associations are not immediately told of a foreclosure by the first lien holder until sometimes months after the unit has been foreclosed. As a result, the HOA may continue to try to collect fees from the current owner for several months until the bank steps forward and acknowledges ownership. To be frank, in most cases, the bank doesn't surface until just about the time the home is planning to close escrow to a new owner. As a realtor, I can see these foreclosures when they occur in within my HOA clients, but most of the HOA managers in California are not licensed Realtors and have no access to the databases where such information is routinely posted.

As to credit reporting issues, the HOA has no way to affect your credit. They cannot report your delinquency to any credit reporting agency because HOAs do not have credit bureau memberships. The only way to 'ding" your credit would be through a successful court action by the HOA, and--now that the home has been foreclosed--this avenue is closed to them as well. Most of the time, I can get the bank that now owns the home to pay at least 6 months assessments in arrears, but beyond that, the delinquent assessments become a "bad debt" write off for the HOA.

I know you've been getting conflicting information on this question, which you've posted twice now, so if you have any additional questions, speak with a qualified real estate attorney for more information.

Sincerely,
Grace Morioka, SRES, e-Pro, CID/HOA Specialist
Area Pro Realty
Co-Author: Homeowners Associations: A Guide to Leadership and Participation
Co-Host: Naked Real Estate on Blogtalkradio.com

You owe the fees. The foreclosure sale only pays off the lien holders if there is enough money to do so. you are responsible for the rest. Your credit can not begin to recover as long as the debt is on your records unless you begin building positive credit again. (7 years) If your debt is overwhelming consider a bankruptcy.

OUCH!

Unfortunately, HOA can do that. The bank foreclosed on the property, but is not responsible for paying off your HOA dues. The HOA could go after the new owner (the bank) ....but if you signed some kind of agreement with the HOA, you may be held liable.

I have one such short sale listing where the owner stopped paying for everything --- mortgage and the HOA. She was even considering letting it foreclose, but the HOA attorney said that outside of her filing for bankruptcy, they will go after her personal assets including garnishing her wages until the balance is paid off. Thankfully, we have a buyer who agreed to pay for the delinquent HOA fees. So my owner is saved from the heartache of a foreclosure.

This may be a good time for you to consult an attorney...perhaps you should look into bankruptcy as well.