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.
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