(Photo: Tom Tingle/The Republic)
Homeowners associations, the enforcers of neighborhood paint colors, holiday decorations and trash bins, are leading the latest surge in Phoenix-area foreclosures.
HOAs are foreclosing on a record number of homeowners for as little as $1,200 in missed maintenance payments, according to an Arizona Republic investigation. And homeowners who thought only their mortgage lender could seize property are losing their houses at sheriff’s auctions, sometimes for just $100 more than they owe.
“It’s become a huge issue,” Arizona Real Estate Commissioner Judy Lowe said. “Most homeowners don’t understand the foreclosure process and don’t know their HOA can foreclose.”
Arizona allows an HOA to foreclose after a year of missed payments or a debt of $1,200. But when HOAs add legal fees and interest to late payments, the debt can more than quadruple in a year.
Some homeowners fighting desperately to keep their homes find HOA balances often don’t match amounts listed in court filings, making it difficult to learn how much they really owe — and impossible to catch up.
Phoenix lawyer Jon Dessaules, who represents homeowners fighting foreclosure, called the process “a cash cow for lawyers.”
“It’s an attorney… selling a house in order to pay himself,” he said.
Most states allow HOAs to foreclose on homeowners who fall behind on monthly dues, though lenders usually have first claim. In Florida, HOAs foreclose as often as lenders. In Nevada, Colorado and more than a dozen other states, HOA claims can supersede those of lenders.
Jan Bergemann of Cyber Citizens for Justice, a Florida advocacy organization, said Florida HOAs also can foreclose for unpaid fines.
“Let’s say you have a roof that needs pressure washing,” Bergemann said. “They can say if you don’t do it in 30 days we will fine you $1,000. If you don’t pay the fine, the association can foreclose. It’s one of the big scams of the association.”
HOAs foreclosing Valley-wide
In metro Phoenix, HOA foreclosures jumped in 2015 as home values rebounded from the recession.
Affordable neighborhoods in south Phoenix and the West Valley have been the hardest hit, though HOAs also are foreclosing in affluent communities such as the Scottsdale Pinnacle condos, Sun City Grand and Provinces in Gilbert.
Homeowners in various stages are fighting back through the courts. Some challenges succeed; others forfeit years of equity to the stroke of an auctioneer’s gavel.
Cynthia Levine, 65, is facing foreclosure on a Maricopa home that she bought in 2006. She owes at least $24,000 in back payments, interest and legal fees to the Cobblestone Farms HOA.
Levine declared bankruptcy days before her home was to be auctioned off. In Arizona, a bankruptcy filing can usually stop collection efforts by HOAs and lawyers until a judge approves a reorganization plan.
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