This response is to CAI's flyer :Call To Action March 21, 2003.
In the following positions taken by CAI lawyers, they repeatedly make
use of instances that do not reflect the "most likely" cases, but special
cases that misrepresent the real issues.
I AM NOT A LAWYER AND I DO NOT GIVE LEGAL ADVICE
Item 1. Waiting 7 years to foreclose.
CAI misleads when it says "If an owner lives in the home and it is their 'homestead'
, and they have no wages or bank account, the other owners must carry the
burden ..." Not so, the HOA has a lien on the property, but the right to
deprive a homeowner of his property as a punishment by a private organization
for the benefit of a third person, the foreclosure buyer, has been removed.
Its argument that 1 year is OK for "small delinquencies", is very weak indeed.
Item 2. foreclosure at fair market value.
The CAI lawyers argue that a $10,000 HOA lien under the existing statute
would permit the HOA to get the property for just the $10,000. Yes, if there
were no mortgage against the property otherwise the foreclosure must bring
in the mortgage debt first. An additional $10,000, which they refer to as,
"the association must pay the mortgage" would be required to return them
some money. In other words, they contradict their limited case argument above.
These astute attorneys then claim that if the house FMV was $100,000,
the "excess" as required by the bill would go to the homeowner and not the
lender. That's just plain bull -- they know better than to say that. The "excess" is after all prior liens are paid off".
They cry that "the association does not have money to pay fair market
values" and therefore the there is no real foreclosures. Again, they speak
with deliberate ignorance, because the association is not required to make
a bid, and if the property has not deteriorated, the FMV will cover the mortgage
and MAY cover the association's lien. There are no guarantees, not even under today laws, that the HOA will get any money.
In a real-life case where the HOA's attorney allowed improper liens of
some $20,000 to be recorded, and then a duplicate to be recorded, totaling
some $40,000 on a $70,000 FMV house. (The purpose was to harm the homeowner by preventing the sale of her home to a buyer, already under contract
). The HOA was willing to settle for just $6,000, but the $40,000 improper
liens were still not removed by the attorney. The amount of the mortgage
was $65,000.
When the home eventually sold in mortgage foreclosure, the lenders were
paid off and the HOA received just $949 of their purported liens. The homeowner
was given a few thousand from the sale.
Also, The sale at market value does not punish the homeowner for a violation
of a private contract, as it appears the opponents of the bill clearly want
to do. Punishment through liens and foreclosure is an unconstitutional delegation
of government powers, so said the courts in Virginia and Rhode Island.
CAI also forgets to mention that of the $10,000 used in the example above,
anywhere from $9,000 to $5,000 would go into their -- the attorney's -- pockets
and not to the HOA.
Items 3 &4. other HOA charges and due process.
The CAI lawyers cry over not being able to charge interest for the delayed
payments, giving the homeowner an "interest free [loan]". Is the HOA in business
to make a profit? Why should it charge interest? While the bill precludes
foreclosure, the amounts owed can be collected on the sale of the home as
a result of a judgment obtained from the courts. No one is taking any money
away from the HOA.
The argument for transferring to Superior Court [based on amount of
money involved] is incomplete as to the effect on the provisions of the bill,
if any.
item #5. affect of homestead on foreclosure
CAI raises another non-existing issue.
Once again the CAI attorneys make reference to a "homestead"
when speaking of the homeowner's property (see 1 above) , as if the homestead
exemption applied.
ARS 33-110 3 speaks of an exception removing this protection that relates
to "consensual liens". Any reading of the CC&Rs and state laws make this
clear. And, after all, the entire CC&Rs are a binding contract, aren't they?
Item 6. consequences of this bill
(a). A nonsensical argument about the need to keep 2 sets of
books -- one for liens and one for not-liens. I'm sorry, these lawyers should
consult a qualified CPA firm to help them understand accounting principles.
(b). Because of the extensive use of lawsuits, CAI argues here,
association costs will rise as a result of costly legal fees required by
this bill and the homeowners will have to foot these bills. Well, guys, look
again. When you do lose a lawsuit, or if the judge does not grant all your
alleged fees, guess who pays the bills today?
Otherwise. the legal costs become part of the amount due the HOA. No
change here. Then again, maybe there will be fewer lawsuits because the HOA
would have to prove the legitimacy of their claims before a judge and many
such claims will be dropped real fast.
That doesn't seem to bother these attorneys, who have been reported to have bankrupted an HOA or 2 for this very reason.
(c). (see 3 above). Now CAI is concerned about interest-free
loans. I didn't know that the HOA is a business to make a profit and needed
this income for a valid purpose. How does this harm an HOA? This is "newfound"
money as a business owner would say, something that's extra and can't be
budgeted or planned for, unless it is a part of the HOA's doing business.
An irrelevant argument designed to raise emotions.
(d). FHA will not guarantee loans if no liens for assessments
say the astute lawyers form CAI. Well, last I looked, this bill doesn't do
away with liens. So what's the big deal? Then, by a stretch of the imagination
. CAI says, "gutting the effectiveness of the lien" by waiting 7 years to
collect. This is followed by the hollow argument, see (2) above, of not being
able to file foreclosures due to fair market value requirement. The dire threat is posed, "There is significant question as to whether the federal government will continue guaranteeing those loans".
These are unfounded scare tactics used not to find solutions, as CAI is
always asking someone to help them with, but pure political propaganda for
the benefit of CAI member pockets. If the FHA had a problem, they would
need to justify the taking away someone's home as punishment to make sure
all others paid their assessments to the HOA. Say what?? That's a clear violation
of legal doctrine, holding a third party responsible for another's obligations.
Developer/builder loans by the FHA are concerned with the ability of
the HOA to maintain property values on the common propertiessubject to the
loans, and does not affect the individual homeowner's property. To hold a
property owner responsible for a loan to a builder by taking away his private
property is ludicrous. The proper way is to hold the HOA responsible and
to require it to maintain adequate reserves to cover bad debts, a recognized
and sound business practice, if indeed the FHA felt the need for further
protection.
In today's economy, and not the depression's 1930s, banks and lenders
are fighting each other trying to give away loans and credit cards. Seems
to me that there is no concern about additional protections being needed.
Don't be fooled by these shameless tactics by CAI. Support the bill.
Support a fair and just application of the laws for all homeowners. Stop
the abuse by HOA attorneys and management firms.