Home Owner Associations Are Going Belly Up with Defaulting Members!

May 29, 2008 | Real Estate |  4 comments

This year is the worst year for foreclosures in history, as expected. With the slide of homeowners goes the slide of the HOA’s that the home is listed with. This is having a very negative impact on the homeowners that remain.

I was informed of a case in Florida where a condo owner can not rent or sell his condo due to the condition of the property grounds which are now not being maintained. This is just the tip of the iceburg. The condo association has 60% of its memebers in default! As a result, the association has had to stop paying for the insurance as well! Now the owners are responsible for getting their own insurance on top of continuing to pay their association dues. In addition, the association faces a real possibility of going bankrupt. The owners are concerned that the utilities are the next thing to be shut off! When this owner contacted the insurance company to get insurance he was told that this is common right now and that many associations are facing similar problems. 

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Reader Comments

tammy gould on July 3, 2008 at 8:00 am

I am in a lease purchase agreement for 2 years now. During this time my husband and I have been doing our best trying to get our credit scores up in order to purchase the house.
We went to a broker who pulled our credit and told us to pay all outstanding debt . It took us this long and now our scores have actually dropped! We have no open credit and no way to get any! Any advise for us? I am around 530 and my husband was below 500 .

Tom Voli on July 7, 2008 at 10:43 am
tom@tomvoli.com

Tammy,

Unfortunately, credit scores require positive reporting accounts to improve. Your scores dropped because the last activity on the account is negative…even though it paid off debt, they were negative items. The system is not seeing positive information since then. That is the problem.

You will need to open a secured credit account (credit card). This is where you deposit an amount that will be equal to your new credit line. This deposit is held as security against the credit line in case you default. It earns a small amount of interest. The key is to use the credit card monthly and maintain a small balance (20% of the credit limit). It is not better to pay if off monthly as many think. The credit scoring models lean towards those who can keep a balance on their account and pay it on time. Keep your balance under 30% of the credit limit and you will see your scores improve over time. Unfortunately, there is no quick fix.

Trish on October 29, 2008 at 12:26 pm

Question! A friend of mine had paid her mortgage late a few times last year, but has paid consectively on time, for the past 12 months. She is trying to refinance, but her report is showing a discrepency. She was late in October of 2007, but they reported that she was late in November, and that is haulting the process. What should I tell her and where is it stated in the FCRA that they must report something late, in the month the payment was late?
Thanks!

Tom Voli on October 29, 2008 at 12:59 pm
tom@tomvoli.com

Trish,

The FCRA entitles your friend to accurate information. What she needs to do is send a letter of dispute to all bureaus that are on the report with this information and detail the error. The bureaus will then contact the lender and require a response from them as to its accuracy. If it is inaccurate or if they fail to respond it must be removed. This will not be a quick fix though.

Considering your friend is in the middle of a refinance they will need to get a letter from the lender indicating that the report is incorrect and that the late should report in October rather than November. If they can accomodate with that request I can have the credit report updated within 5 days to reflect the change.

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