Federal Government Delays Residential Foreclosures

by Tom Schild

The federal government agency which regulates Fannie Mae and Freddie Mac recently announced that its 2015 goal is to “avoid foreclosure whenever possible” and provide “more favorable outcomes for borrowers”.  For condos and HOAs with owners not paying their mortgage and association assessments, this means continued delay in lender foreclosures.

Many borrowers continue to own homes where mortgage payments have not been made for several years.  More than half of all delinquent loans held or guaranteed by Fannie Mae and Freddie Mac are at least one-year delinquent, according to the Federal Housing Finance Agency (FHFA) which is responsible for the supervision of these housing finance companies. As of late 2014, more than 300,000 loans with a total unpaid principal balance of about $54 billion were over one-year past due.

In January 2015,  FHFA Director Mel Watt reported to a congressional committee that it expects Fannie and Freddie to increase consumer awareness of the Home Affordable Refinance Program (HARP) to reduce mortgage payments and to “continue refining and improving other loss mitigation and foreclosure prevention strategies.”  Mr. Watt explained that FHFA will continue to review loss mitigation options to help families stay in their homes and stabilize communities.

FHFA has also instructed Fannie and Freddie to reduce the number of severely delinquent loans they hold by selling more of these loans to private investors which have experience to successfully provide foreclosure alternatives to borrowers who are seriously delinquent.

Under new FHFA guidelines issued in March 2015, purchasers of delinquent loans are required to evaluate all borrowers for loan modification, short sale, and deed-in-lieu of foreclosure as alternatives to foreclosure.   Foreclosure must be the last option.

The federal policy of delaying residential foreclosures could mean several more years before a property is foreclosed on by the lender.   This is likely to cause continued financial hardship for condominiums and homeowner associations where the owner is not paying the association assessments.

Separately,  FHFA has recently filed suit seeking to invalidate foreclosure sales based on HOA assessment liens where state law recognizes a “super priority” for such liens. In Nevada and the District of Columbia which have “super priority” lien statutes,  appellate courts have recently ruled that foreclosure of such liens extinguishes the mortgage.  FHFA contends that such foreclosures are contrary to federal law to the extent they extinguish the Fannie Mae mortgage interest in property.

POSTED BY:  Thomas Schild Law Group, LLC, www.schildlaw.com

2015 Maryland Legislative Session Ends With No New Community Governance Laws

 by Tom Schild

The 2015 legislative session of the Maryland General Assembly ended April 13 after lots of talk but not much action on bills concerning condos, coops and homeowner associations.

Legislation to extend resale disclosure requirements to homeowner associations and cap the fees which may be charged by condos and HOAs died in the final hours of the legislative session.  As passed by the House of Delegates, the bill would also have limited the liability of a condo or HOA for issuing an incorrect resale disclosure statement. The Senate approved the fee cap but did not agree to the liability limits. Therefore, the legislation was not enacted.

A bill to prevent developers from limiting condominium statutory warranty rights was withdrawn; and a bill to require access to common areas for political candidates was rejected on initial review by a House legislative committee.

A proposal  to eliminate a 3-month waiting period before a housing coop can initiate legal action to evict a coop member for not paying assessments was referred for further study.  Legislation to regulate community association managers was not considered this year for the first time in several years

Although not limited to community associations, several other bills would have made it more difficult to collect assessments from delinquent owners.  One bill would have restricted the ability to collect court judgments by increasing the amount  exempt from garnishment.  Several other bills proposed to delay residential foreclosures.  These bills were not enacted.

These topics may get another look next year.  For 2015, the General Assembly session had lots of talk—but no new laws regarding governance of condos, coops and HOAs.

POSTED BY: Thomas Schild Law Group, LLC, www.schildlaw.com

 

Association Assessments Linked to Rental License

A new law in Montgomery County, Maryland requires that the owner of property in a condo, coop or HOA must be current in payment of association assessments in order to obtain a County rental license to lease the property.  As part of the application for a rental license beginning June 16, 2015, an owner must certify that the assessments are no more than 30 days past due.

Additionally, the County may deny, suspend, revoke or refuse to renew a housing rental license if the board of directors of the condo, coop or HOA submits a recorded statement of lien or unpaid court judgment as proof of unpaid association assessments.

Prince George’s County and Howard County have similar laws linking payment of association assessments to the issuance and revocation of a rental license.

POSTED BY: Thomas Schild Law Group, LLC, www.schildlaw.com.

2015 Maryland Legislative Session Heats Up

by Tom Schild

Despite the recent arctic air sweeping through Maryland, the 2015 Maryland legislative session is heating up.

After a slow start in January with many new legislators and a new Governor taking office, a rush of bills were introduced in February.  Among the bills concerning governance of Maryland condos, coops and HOAs are proposals to (1) prevent developers from limiting condominium statutory warranty rights; (2) require access to common areas for political candidates; and (3) require homeowner associations to provide resale disclosure information and cap the fee charged by condos and HOAs for providing resale disclosure information.

A proposal to change the housing cooperative law adopted in 2014 would eliminate a 3-month waiting period before a housing coop could initiate legal action to evict a coop member for not paying assessments.

Other legislation under review would restrict the ability to collect court judgments for delinquent assessments. Although not limited to condos, coops and HOAs, the bill would make it more difficult to obtain money in bank accounts and sell property to pay a person’s debts.

Legislation regarding licensing of community association managers (which had been considered the past several years) has not been introduced in 2015.

The 90-day legislative session of the Maryland General Assembly runs until April 13, 2015.

Maryland County Links Rental License to Condo and HOA Fees

by Tom Schild

A Maryland county in the Baltimore-Washington DC region has enacted a new law which conditions issuance of a rental license for a property in a condominium or homeowners association on being current on payment of the condo/HOA assessments.  The Howard County law requires property owners to certify they are no more than 30 days behind in payment of the association assessments when applying for a rental license.

Additionally, a rental license may be suspended or revoked if the condo or HOA notifies the County of a final adjudication that the owner is more than 30 days past due in payment of assessments.

The new law is intended to aid condos and HOAs by ensuring that property owners are paying their condo and HOA fees when receiving rental income and benefiting from the services and facilities provided by condos and HOAs, The legislation was passed by the Howard County Council in early May 2012 and goes into effect in mid-July.

Maryland Foreclosure Purchaser Must Pay Condo Fees

by Tom Schild

The successful bidder at a foreclosure sale of a condominium unit is not exempt from paying condo fee assessments until legal title is conveyed after a court ratifies the sale, the Maryland Court of Special Appeals ruled on December 1, 2011.

In Campbell v. Bayside Condominium, a Maryland foreclosure sale purchaser challenged the authority of the Condominium to impose a lien for assessments during the interval between the foreclosure sale date and conveyance to the purchaser several months later.  She contended that the Maryland Condominium Act definition of “unit owner” should be applied to mean only those with “legal title” are obligated to pay the condo fees.

Under long-established Maryland law, the purchaser at a foreclosure sale acquires “equitable title” as of the sale date.  After court ratification of the sale and upon conveyance by deed, the purchaser acquires “legal title” retroactive to the foreclosure sale date.  Applying this principle in the context of the purchase of a condominium unit at a foreclosure sale, the Court of Special Appeals concluded that the term “unit owner” in the Condominium Act embraces the holder of equitable title.  Therefore, a foreclosure sale purchaser is liable for payment of assessments from the date of the foreclosure sale.