It is less than a year since SB 137 (Ducheny) became law in California to protect homeowners in homeowner associations. It provides that a homeowner association cannot foreclose on a member's home for unpaid assessments of less than $1,800.

Yet homeowners networking on AHRC claim that they have uncovered a scheme by foreclosure companies to get around the law. They charge that foreclosure companies refuse to accept any payment that is less than the entire past due amount if a homeowner falls behind in their dues, and then file the foreclosure. They provided the following illustration.

If the monthly dues are $300, and the homeowner can only pay $200, the foreclosure companies simply return the check. If next month, the homeowner sends in the full amount, $300, the foreclosure company rejects the check. The foreclosure company demands the full $600 for months one and two, plus any fees and fines that they impose. Hence, in a short six months, the foreclosure company will have reached the magic $1,800 figure, and the foreclosure party begins.

In order to understand how one neighbor could do this to another, a brief history is in order.

After CAI lawyers and managers began filing liens, sometimes fraudulently, and selling the homes of property owners in California homeowners associations without any hearings or court proceeding, homeowners discovered that two lawmakers, Gray Davis and Larry Stirling, had written laws with deliberate loopholes to create foreclosure floods.

Predatory CAI lawyers moved in, targeting seniors, minorities, immigrants, members of the military, the infirm, single parents, the politically unconnected. and ones whose homes are paid off or have the most equity.

Homeowners tried for years to get lawmakers to write laws to close the loopholes and protect their properties but found that the CAI lawyers and lobbyists profiting from the foreclosure floods also controlled the legislature.

With the advent of the internet, homeowners forged homeowner-media networks and began exposing the horrors stories.

In 2003, homeowners joined the angry voters who recalled Gray Davis and replaced him with Governor Schwarzenegger.

In 2004 the Radcliff family reported that their home was stolen in foreclosure when they missed a $250 annual payment to the Copperopolis Homeowner Association. When Governor Schwarzenegger ignored their request for help, homeowners relayed their story to the media, and this created a tidal wave of public reaction.

Assemblyman Darryl Steinberg used the opportunity to introduce AB 2598. The bill banned non-judicial foreclosures to collect overdue assessments but after intense pressure from lobbyists (among them, the California Association of Community Managers, California Trustees Association, Community Associations Institute, First American Title Corporation and Leisure World), the final version of AB 2598 was significantly watered down, and only outlawed homeowners associations from foreclosing for amounts less than $2,500.

Nevertheless, Governor Schwarzenegger vetoed the bill. Many of his donors profit from homeowner association foreclosures.

Assemblyman Steinberg termed out and left office.

In 2005, Senator Ducheny reintroduced an identical bill, SB 137. She and her consultant Edgar Zazueta, industry lobbyists and lobbyists purporting to represent homeowner interests, and other consultants, bartered and chipped away at the bill. SB 137's list of opponents included AMMCOR, California Association of Realtors, California Land Title Association,, Community Associations Institute, First American Corp., Kocal Management Group, La Costa Apartments Homeowners Association, Laguna Hills Mutual No. Fifty, Lake Forest Community Association, Northwood Pointe Maintenance Association - Irvine, Solera at Apple Valley, Third Laguna Hills Mutual, United Laguna Hills Mutual, United Trustees Association

As usual, homeowners and advocates were not privy to the wheeling and dealing that took place behind closed doors. Governor Schwarzenegger after working with Senator Ducheny to mollify lobbyists signed SB 137.

Homeowners were told that their homes would not be foreclosed on if they owed less that $1,800 in dues and assessments. The Legislative Counsel's prelude to the chaptered bill said:

The bill would provide that when an association of a common interest development seeks to collect delinquent assessments of less than $1,800, not including accelerated assessments and specified late charges and fees, the association must either file a civil action in small claims court or record a lien upon which it would be prohibited from foreclosing until the amount equals or exceeds $1,800 or the assessments are more than 12 months delinquent.

Civil Code 1367.1(c)(3) allows a homeowner with a delinquency to request a payment plan and requires the board to at least meet with the homeowner. It says:

(3) An owner, other than an owner of any interest that is described in Section 11212 of the Business and Professions Code that is not otherwise exempt from this section pursuant to subdivision (a) of Section 11211.7, may submit a written request to meet with the board to discuss a payment plan for the debt noticed pursuant to subdivision (a). The association shall provide the owners the standards for payment plans, if any exist. The board shall meet with the owner in executive session within 45 days of the postmark of the request, if the request is mailed within 15 days of the date of the postmark of the notice, unless there is no regularly scheduled board meeting within that period, in which case the board may designate a committee of one or more members to meet with the owner. Payment plans may incorporate any assessments that accrue during the payment plan period. Payment plans shall not impede an association's ability to record a lien on the owner's separate interest to secure payment of delinquent assessments. Additional late fees shall not accrue during the payment plan period if the owner is in compliance with the terms of the payment plan. In the event of a default on any payment plan, the association may resume its efforts to collect the delinquent assessments from the time prior to entering into the payment plan.