Real Estate Fraud
HOA Foreclosure Fraud

While no definitive figures exist of how many foreclosure actions are initiated by home owner associations, an unofficial survey of state association lawyers reveal nearly 20,000 filings since 2000. Most homeowners quickly paid the claim.

Homeowner associations, also known as HOA, are about control. A perfect manicured neighborhood without the wrong element. This is ideal, but it has its drawbacks.

People have reported that a $5 late assessment fee turned into a $3,000 bill once attorney fees and penalties were tacked on. Then the foreclosure was held and the home was sold. The owner was evicted from his house and the district attorney refused to investigate citing the Sterling Act allowed the association to conduct the foreclosure.

What has so many victims outraged is that the real estate laws allow for the "third party bona fide buyer." Which means the victim will not get their home back because the buyer was an innocent buyer to the transaction. Or were they?

The American Homeowners Resource Center is among the activist advocating change throughout the country. They point to criminal laws lacking teeth to take a bite out of the real estate crimes because the real estate civil code provides too much room for scamsters to manipulate. So, they are calling for stricter non-judicial foreclosure laws.

"We've been asking Senator Bittan to author a bill that abolishes non-judicial foreclosures in homeowner associations," said Elizabeth McMahon, spokesperson for American Homeowners Resource Center. "The Davis Stirling Act authorizes a homeowner association to foreclose on a homeowner's property for the non-payment of assessments, dues, and related lawyer and collection fees. This draconian tool has been used throughout the state with devastating impacts.

The organization is also seeking a change in the state's constitution that will make homeowner's associations another layer of government and elections must follow election laws.

See the AHRC's proposed homeowner bill of rights.

HOA Foreclosure Bill Passes Senate Judiciary

By Jim Wasserman, Associated Press Writer
Tuesday, March 29, 2005

SACRAMENTO (AP) - A bill proposing to ban home foreclosures as a tool to collect small debts in private communities easily cleared a key Senate hurdle Tuesday, beginning a journey that could eventually collide with the veto pen of Gov. Arnold Schwarzenegger.

The Senate Judiciary Committee voted 4-1 to send the bill affecting more than one-fourth of California's households to a full Senate vote later this spring.

Lawmakers passed a near identical bill last year making California's 37,000 homeowner associations use small claims court to collect unpaid sums below $2,500, but Schwarzenegger vetoed it.

Schwarzenegger said it could force dues-paying homeowners to make up for lost money caused by those who don't pay.

The new version, by Sen. Denise Ducheny, D-San Diego, would end the long-standing power of homeowner associations to auction off a member's home for failing to pay assessments that average about $200 a month in California.

"Often for less than $200 people are losing their homes and being evicted without the due process rights given to tenants," Ducheny told the committee. "We understand the need for everyone to pay their agreed-upon debts, but we also want to protect both the equity of homeowners and their due process rights."

Nearly a dozen homeowners across the United States have lost their homes over small unpaid sums since 2001, triggering widespread negative publicity for one of the nation's fastest growing residential lifestyles.

Ducheny's bill would continue to allow foreclosures for amounts above $2,500 without a court's review. It would also significantly toughen foreclosure practices, giving homeowners 90 days to get their homes returned to them and make buyers at auctions pay a minimum of 65 percent of the home's value.

Attempts to reach compromises that would meet Schwarzenegger's favor haven't worked, Ducheny said, adding that meetings haven't led to any specific proposals.

Several retirees groups backed the bill Tuesday, saying it protects home equity that takes a lifetime to build.

"Homeowners need to pay assessments and homeowners associations need legal tools to collect them," said Marjorie Murray, lobbyist for the California Alliance for Retired Americans. "But it is our strong belief that foreclosure should be the last procedure used and only used reasonably."

Lobbyists representing association managers and boards of directors tried unsuccessfully to reduce the amount qualifying for small claims court collection procedures to $1,000 or six months worth of late payments.

They also failed to win changes to make the bill effective for only two years. Though the bill moved forward, significant disagreements still loom over its future. Especially large is the idea of a $2,500 grace period before foreclosure can begin.

"We feel by placing the threshold it requires us to increase assessments on all other innocent homeowners who do try to pay their assessment on time," said Jennifer Wada, lobbyist for the California Association of Community Managers.

California associations collect dues for a range of needs that including lawn mowing, pool maintenance and private security.

Ducheny's original bill surfaced last year after a pair of Calaveras County retirees lost their home for missing a $120 payment to their association. The couple still live in the residence pending the outcome of a lawsuit against the association and collection agency.

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