What You Don’t Know About Your HOA/POA Could Cost You

Pine Mountain Club is a property owners association and also a 501(c)(7) social club subject to specific IRS regulations about membership income and activities.  A homeowners’ association or property owners’ association (abbrev. HOA or POA) is an organization created by a real estate developer for the purpose of developing, managing and selling a development of homes.  California HOA/POA’s are subject to the Davis-Stirling Common Interest Development Act, which is the common name of the Civil Code beginning with section 1350.

But here’s what you really need to know, and so many of my friends and neighbors in PMCPOA don’t know this:

If you fail to pay your association assessment, you can lose your property through foreclosure!
There is no provision to withhold your assessment for personal reasons, hardship, or disagreement with the financial management of the HOA.  Additionally, the association is not required to grant you any relief through a hardship plan.

In 2008, Pine Mountain Club board members did develop and approve a hardship payment plan but it is not publicized or mentioned much.  I’m not even sure that the program is still available.  If you have not made your assessment payment on time, you need to contact Best Alliance and inquire about this program before you lose your home.

What else you might not know: PMCPOA applies your payment to the oldest assessment due and will not accept partial payments in the office.  You cannot make a full payment on the most recent assessment if you still have an old assessment and related fees outstanding.

What if you have a legitimate dispute regarding your assessment? An example of a legitimate dispute would be your assertion that you made your assessment payment on time, but were sent to collections anyway.

According to the Davis-Stirling Act, “an owner may dispute an assessment debt by submitting a written request for dispute resolution to the association as set forth in Article 5 (commencing with Section 1363.810) of Chapter 4 of Title 6 of Division 2 of the Civil Code.  In addition, an association may not initiate a foreclosure without participating in alternative dispute resolution with a neutral third party as set forth in Article 2 (commencing with Section 1369.510) of Chapter 7 of Title 6 of Division 2 of the Civil Code, if so requested by the owner.  Binding arbitration shall not be available if the association intends to initiate a judicial foreclosure.”

Note:  This is not intended to be legal advice.  If you truly believe you have a dispute, seek an attorney experienced in association matters.

The association must also follow California foreclosure law if initiating foreclosure.  More on that to come.

Loan Modification Firms Cannot Collect Upfront Fees

On October 11, Governor Arnold Schwarzenegger signed Senate Bill 94 which took effect immediately. This bill bars loan modification firms, attorneys and other brokers from asking for upfront fees when working with struggling borrowers to get their mortgages modified. This ban expires on January 1, 2013.

This action was a swift follow up to massive numbers of complaints to the California Department of Real Estate from consumers who said they paid up to $4,000 upfront to firms that often abandoned them, or never started the process at all.

The new law also specifies that loan modification firms must tell potential clients they can get the same services for free from government-approved nonprofit mortgage counselors. The firms cannot receive payment until they have performed all services promised in a contract with the borrower. Borrowers must pay the loan modification firm for services provided, even if the firm can’t get the loan modified.

What I have personally witnessed (prior to this bill) is a double-whammy with lawyers pressing scared borrowers to pay a retainer to sue their lender in a “produce the note” strategy coupled with a second retainer to work on a loan modification while the lawsuit was pending. This hit would cost a desperate borrower at least $6,000. The rub? The lawyers never reviewed their client’s financial situation to see if a loan modification was even possible. Banks have several criteria for granting a loan modification, and if a borrower has an excessive debt load, or is unemployed, a loan modification may not even be possible at all, no matter the amount paid to a lawyer.

Personally, I am thrilled that this bill passed. I hate seeing these sharks taking advantage of people.

If you are interested in scheduling a no-fee, no obligation appointment with me to review your financial situation and see if a loan modification might work for you, give me a call at 661-242-2636!