Tag Archives: lender foreclosures

2016 Maryland Condo and HOA Legislation—What’s Hot and What’s Not

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As the Maryland General Assembly heads to the end of the 2016 session on April 11, some bills regarding community association governance are still under consideration.  Others have been killed in committee.  To become law, a bill must be passed by the Maryland House and Senate and signed by the Governor.

Here’s What’s HOT!

Resale Disclosures. A bill to cap the amount which an association or management company can charge for providing resale disclosure information has passed the House and is headed to the Senate.  If enacted, it would also create a new obligation for homeowners associations to provide resale disclosure information to an owner selling  a home in an HOA.

Annual State Registration.  Legislation to require each condo, co-op and HOA to register with the state was passed by the House after it was scaled back to limit the information required.

Foreclosure and Tax Sale Notices.   Where condos and HOAs have recorded assessment liens, a bill passed by the House would require lenders to notify the association of any proposed, postponed or canceled foreclosure sale.  Another bill passed by the House and Senate would require tax sale purchasers to notify condos and HOAs when a court suit is filed to prevent owners of property in those communities from retaining ownership of property purchased at a tax sale.

 

….and Here’s What’s NOT!

Condo Construction Warranty.  House and Senate committees rejected proposed changes in the Maryland Condominium Act to prohibit provisions in condo sales contracts and bylaws which limit the ability of condo associations to file suit to enforce construction warranties.

Amendment of Governing Documents.   A House committee also killed legislation to make it easier to amend the governing documents of condos and HOAs by allowing an owner’s failure to vote on a proposed amendment to be counted as that owner’s approval of the proposed amendment.

 

 

Federal Government Delays Residential Foreclosures

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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

Maryland Foreclosure Laws Revised…..Again

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by Tom Schild

Maryland foreclosure laws have been revised again for the fifth consecutive year.  Previously, changes were made to provide homeowners with more time, additional notices, and an opportunity for mediation before a foreclosure sale can occur.

For condominiums and homeowner associations, newly enacted mediation procedures could further delay lender foreclosure sales.  But, new post-sale notice requirements could help associations track foreclosure sales and collect post-sale assessments.

Maryland Governor Martin O’Malley last year appointed a Maryland Foreclosure Task Force to examine recent foreclosure trends in Maryland and to make recommendations regarding state government policies to aid homeowners and neighborhoods impacted by home foreclosures

Foreclosure Mediation  

Adopting a  recommendation of the January 2012 Task Force report, the Maryland General Assembly amended the foreclosure laws to allow a lender and homeowner to participate in “pre-file mediation” with a government mediator before a foreclosure court suit is filed.  To participate in such mediation, the owner must receive housing counseling services from a non-profit organization or government agency.  Where there is “pre-file mediation”, the homeowner will not be entitled to additional mediation after a foreclosure suit is filed (HB 1374).

Foreclosed Property Registry

Separately, a bill to establish a Foreclosed Property Registry was enacted.  A foreclosure purchaser will be required to notify the Maryland Department of Labor, Licensing, and Regulation (DLLR) after a sale has occurred and after a deed is recorded.  This will allow government agencies to better locate the foreclosure purchaser after the sale until the property is formally transferred by recording a new deed in the land records.

The purchaser information filed with the Foreclosed Property Registry will be available only to DLLR and local government officials.  Those agencies may provide the information to a person who lives on the same block as the foreclosed property is located and to a homeowners association or condominium where the property is located (HB 1373).

Post-sale Notice

Additionally, the purchaser of residential property at a foreclosure sale will now be required to provide a copy of the court ratification order to the tax office for the County where the foreclosed property is located.  This is intended to enable state and local governments to collect the correct property tax due for property which is no longer owner-occupied from the date of foreclosure sale regardless of when the deed in recorded (SB 123).

Maryland Foreclosure Purchaser Must Pay Condo Fees

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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.