Monday, May 18, 2015

Super-Priority Liens may cost You more Money

Maybe you have heard from the financial crisis in housing industry from years ago. At that time only the lenders had the opportunity and the money to foreclosure on a home. But as soon as the homeowner was in default and did not pay the mortgage, they often also stopped paying their homeowner association fees when their property was located in a mandatory homeowner association community.

The unpaid association fees to the homeowner association resulted in a shortfall of the association's budget and the remaining homeowners of the association had to cover that shortfall. This financial problem of the homeowner association started to happen shortly after the financial crisis in many state and the homeowner association began to foreclose on the defaulting homeowners themselves.

However, in these cases the mortgage of the lender was not erased from the property records and the banks could still foreclose on the property later and they often did. During this period the lender did not pay the homeowner association fees but the new title owner, which were often the homeowner associations could at least rent the property and cover their shortfall with the rental payments.  

Now 22 states and the District of Columbia have granted the homeowner associations a so-called Super-Priority Lien. This means that such a homeowner association liens that results from not paying the homeowner association dues will have the priority before the mortgage lien of the lenders.

This is a potential risk for the lenders and can lead to higher interest rates for such a mortgage in a homeowner association community or a higher down payment requirement for the purchase. Either way you as the home buyer will have to pay the price. Therefore check with your lender their policy in this matter before you make your decision to buy a home in homeowner association community.

Need more information? You can contact us at
In Real Estate always on your side -