HOA Fees and Foreclosures

       When a bank forecloses on a property the title of the property passes from the borrowing homeowner to the bank. Once this occurs, the bank not only becomes responsible, but also liable for paying the HOA fees if the house is subject to them. However, a homeowner can be stuck in a financial mess when a bank actually forgoes foreclosing. Banks are smart, and when they find out that the home they have begun foreclosure proceedings on has HOA fees, they will actually cease foreclosure and let the HOA fees build up against the homeowner.

       We recently saw this with one of our clients. The husband of the married couple had lost his job. Unable to pay the mortgage, the bank began foreclosure proceedings. In anticipation of the foreclosure the couple moved in with his caring mother. However, once the bank realized that HOA fees were required to be paid, they ceased the foreclosure. So as of now, the bank will not take the house, the couple no longer lives there, no one will buy the house because it is worth less than the mortgage on the property, and because the title of the property is in the couple's name, the HOA has sued the couple for past due HOA fees. So without the ability to get the title of the house out of their name and the ever increasing HOA debt, the only way out of this rut was to file bankruptcy. It was a very unfortunate situation, but when an underwater house is coupled with HOA fees, banks have figured out its better for them to stick the homeowner with the bill.