Freedom of Speech and the Housing Financial Crisis

April 17, 2008

By Peter Amherst

In what some observers claim is a shocking violation of the First Amendment, a California court has ordered the domain name of the most prominent voice for homeowners to be turned over to the biggest homeowner association law firm, Peters and Freedman. (Technically, the domain name is to be turned over to a homeowner association, but observers claim that the real party in interest is the law firm.)

For more than 10 years, the American Homeowners Resource Center has operated a website, www.ahrc.com, which has enabled homeowners who live in homeowner associations, both to learn about homeowner associations and to share their views and experiences. The thousands of articles on the website range from analyses of legislation to reports of abuse by homeowner association boards and their lawyers. In the process, it has earned the ire of some in the homeowner association industry.

Prominent among these is the law firm of Peters and Freedman, who claim to represent more than 700 homeowner associations in Southern California. Articles on the website have reported about their involvement in foreclosures. In one case, a condo owner, Melissa Colburn, filed a RICO action against them when she found that her condo had been sold from under her without any notice.

Despite admitting in her ruling that "plaintiff's motives in seeking the domain name are likely mixed; i.e., that plaintiff is likely motivated in part by a desire to close down the web site", Jane D. Myers , a lawyer employed as Commissioner by the Orange County Superior Court, ordered the web site to be turned over to them.

As the website gets over 100,000 hits a day (almost 3 million a month)and is recognized by search engines such as Google as being the number one wesbite devoted to homeowner associations, the commissioner's ruling silences this independent voice.

At a time when the entire country is roiled by a financial crisis of incalculable proportions, some obvservers claim that the necessity of having independent voices which are beholden to none, is even more pressing. They point out that the so-called mainstream media missed the looming financial crisis in the same way as they missed the lack of evidence for the Iraq war.

As Congress grapples with ways to address the crisis which has shaken the very foundations of the American financial system, many argue that Congress needs to affirm - with legislation if necessary - the importance of the First Amendment. They say that vital, robust journalism is essential to America. If that vital, robust journalism is stifled in any way - such as the taking of the AHRC.com domain name by powerful corporate interests - crimes and abuses will go unreported.

Homeowner associations now represent a massive part of the U.S. economy. With over $35 trillion in housing stock, and more than 1 in 5 living in a homeowner association, they are integral to the economic health of the country. If they sneeze, the rest of the ecomony may get a cold.

Already, initial reports indicate that the foreclosure rate is highest in homeowner association housing. As the majority of new housing is now in homeowner associations - in fact, many cities now mandate that all new housing tracts have homeowner associations - a significant number of sub-prime mortgages were for this type of housing.

But, as AHRC has reported, another financial crisis is looming on the horizon. As the housing stock in homeowner associations ages, the need for repairs increases. However, in many areas, homeowner associations are woefully underfunded to meet these repair bills.

Some boards of homeowner associations have gone out and obtained loans from banks - for which they do not need homeowner approval - to fund these repairs. The homeowner association then issues a special assessment on each homeowner to pay for that loan. With many homeowners living on razor thin budgets, such increases are beyond their means. When this is coupled with dramatic declines in home values, especially when a homeowner owes more on their home than the home is worth, many homeowners will opt simply to walk away from the home.

This creates an even bigger inventory of unsold homes, which reduces the value of homes even more, and inevitably deepens the financial crisis. In other words, the crisis now begins to feed on itself, leading to the possibility that it will go into a tailspin. A recession then becomes a depression - and that spells disaster for the country.

Hence, the ramifications of a decision in a court case in California could be immense. AHRC has had the courage to publish without fear or favor the unblemished truth about lawyers, politicians, judges and others who have been involved in homeowner associations. To kill that voice sends an unmistakeable message to all similar voices that powerful corporate interests will be allowed to prevail - at the expense of the country.

Individuals and groups are urging Congress to take action to preserve fundamental First Amendment rights in the case of AHRC.com. They say that the founding fathers may not have got everything right in drafting the Constitution - but they got at least one thing right - the First Amendment.