COVID Relief and Artificial Ignorance

Featured Img

I have marveled at the way our economy has remained relatively healthy throughout COVID. Many of us expected a much more significant downturn, but some industries have actually prospered. Much of this can be attributed to the significant stimulus from the government, but that comes with strings attached. In this article we will take a look at what that stimulus means in the long run for community associations and how we can get ahead of the impact that will occur.

Do we have a false sense of security because of the trillions of dollars pumped into our economy? And if so, is that real economic health, or is it artificial? I contend that much of what we are experiencing is not sustainable, and we have a false sense of security, yet many want to believe that we will continue to experience economic growth. I call this artificial ignorance.

Artificial ignorance is not an antonym for artificial intelligence. It is merely a descriptor for the artificial sense of security we have during this once-in-a-lifetime pandemic. Some believe that our thriving economy will continue, but that is not plausible. What we have been doing is not sustainable. So, what comes next?

Who knows what will happen as we exit COVID, but I do know HOAs and condos are in a unique position. Unlike mortgage companies with federally backed loans, nonprofit community associations need timely payments to sustain their operations. These operations include municipal-like services and amenities, such as: trash collection, road and building maintenance, landscaping, snow removal, pools, fitness rooms, and playgrounds. The broad brush of forbearance and moratoriums cannot be applied to community associations, which operate as non-profits. Yet lawmakers continue to make overtures about relief for debtors that would leave community associations trying to survive without those payments. This could prove to be extremely harmful to our industry.

There are certainly situations where unique hardships related to COVID merit our consideration and support. Communities have been offering extended payment plans and withholding punitive collection actions in those cases. But, this can only be sustained to the extent that the rest of the homeowners within the Community can share the burden of those hardships. That is rarely possible, and the bank account is going to get dangerously low, so we won’t have an option but to require payment in order to fund the operation of the nonprofit community association.

Community associations may be feeling good now, as a recent article published by the CAI found that delinquency rates for January and February were only 5%, a 2% decline from the end of 2020, but this cannot be expected to last long. As Dawn M. Bauman, CAE, executive director for the Foundation for Community Association Research and CAI’s senior vice president for government and public affairs stated, “While assessment payments are holding steady, we expect to see an uptick in delinquency rates once mortgage companies are authorized to handle delinquent mortgage payments.” Community associations need to be prepared for this increase, and this puts boards and community managers in a difficult spot. This can feel like a no-win proposition. But, it’s more important now than ever to collect on delinquent assessments before it gets too late and the financial problem spins out of control.

We need recognition of the unique challenges facing community associations. The broad brush that is being used by lawmakers and policy wonks is an existential threat to community associations if they are not acting with our unique situation in mind. Exemptions need to be extended to community associations, managers, and collectors for the work they are doing to help these nonprofits sustain their activities. Without some form of protection from government moratoriums and opportunistic attorneys, we all stand to lose.

Headed Toward a Cliff: Losing Your FHA Eligibility

Featured Img

I am surprised that I have not heard more about the risk of communities losing FHA eligibility amidst COVID-related delinquencies.  According to a recent article from CAI, the FHA will not secure mortgages in communities with greater than 10% delinquency.  A delinquency rate of 10% was unthinkable one year ago, but many communities are now at that point, but (and this is a big BUT) they may not realize it.  The reason is that mortgage forbearance programs and government stimulus have helped owners remain current on their assessments.  These programs won’t last forever, and we will know the real unobscured delinquency rate when they expire. 

According to CAI “one in 10 homeowners are unable to make mortgage and related payments as a direct result of the COVID-19 national emergency.”  Let me help you with that math; it’s 10%.  See how easily your community could fall out of compliance with FHA requirements?

If you are unfamiliar with FHA requirements and benefits, take a look at these recent articles from the Community Association Institute and The Washington Post.  Access to FHA-backed loans is an important element of competitive financing and property values.  Simply stated, if you lose your FHA eligibility, your property values go down.

Sadly, many boards and managers are acting as if delinquency rates will not change.  To make matters worse, a large number of communities have placed an indefinite “hold” on collections during COVID-19.  These communities are creeping close to the edge of the FHA cliff. 

Prudent communities are making preparations now, before it is too late.  Proactive measures that can help communities address delinquencies come down to three elements:

SCREEN

For Potential Hardships

SMART

Data Analytics & Technology

SAVE

With Deferred Fees

This strategy ensures you are taking appropriate fiduciary action during an extraordinarily unusual time.  The alternative, which appears to be the “do nothing” strategy (which is still doing something) puts your fate in the hands of the economy.  Or the government.  Or the gods.  Who knows, but it certainly defies fiduciary scrutiny.  I couldn’t put it any better than The Washington Times:

“A condo board has a fiduciary responsibility to its owners to maintain the financial health of the association,” Knull says. “If a board permits the percentage of delinquencies to grow and remain uncollected, it is failing to properly discharge its duty to the condo association’s owners. Encountering condo projects with excessive delinquencies is a turnoff to buyers, who see no upside to voluntarily incurring financial risk by purchasing in a community that doesn’t seem well managed or financially responsible.”

Effective collections are an important element of financial health. As you review the effectiveness of your collections, consider getting standardized bids on an annual basis. If you would like a free collection RFP template, email us at [email protected] 

RFP for Collections

Featured Img

GET YOUR FREE TEMPLATE TODAY!

It’s completely free – and we only need your email address to send it over!

When I owned a property management company, we went to great lengths to standardize our bidding processes.  We created online bidding, vendor screening, and requests for proposal (RFP) webforms that could only be submitted if they were complete; no opportunity to cross out items or modify the RFP.  The result was consistent bids that we could present to Boards in a simple matrix.

The single exception to our efforts was attorneys.  When we requested proposals for collection services, our forms would get discarded and instead we would get a brag letter, rate sheet, and retainer agreement.  What we learned was that local attorneys often relied on their relationship with the Board to circumvent the manager, so any effort to create standardization and accountability in that relationship was met with stiff resistance.  But this is changing.

Relationships are important, but standardization required by the Fair Debt Collection Practices Act (FDCPA) all but ensures that collections be treated as a commodity.  The letters and processes used between different collectors will have very little distinction, so awarding collection services to one vendor over another should be based on results and ROI. 

Board members are becoming savvier about their options, and their expectation for tech-driven efficiency is increasing.  Workflow software and document assembly systems are helping to drive down the cost of collections while increasing accuracy, and predictive analytics can instantly provide the best collection strategy for each delinquency.  The result is better ROI with less liability, faster recoveries, and less punitive cost to the debtor.

Collections are an important aspect of the fiduciary relationship.  As Boards consider the cost and ROI of their collections, it only makes sense that they seek standardized bids on an annual basis. 

If you would like a free Collection RFP template, fill out your email address and we will contact you immediately.  We wish you the best in the new year and hope that this helps!

Overwatering Delinquencies

Featured Img 0

I was fortunate to join YPO (Young Presidents Organization) when I was… young. The organization exposed me to leadership principles and concepts at the forefront of various industries. In many ways, that has been a blessing. But it has also been a frustration as I came to realize the apathy within the condo/HOA industry for advancement. In many ways, our industry continues to operate in analog despite our digital surroundings.

This was most apparent when I owned a property management company. We had to write our own software, develop community websites, and adapt systems from other industries that were lightyears ahead of ours. One area where we saw dramatic improvement was in the collection of delinquencies.

Like most management companies, we handed delinquencies off to a local attorney and forgot about them. But we grew tired of the poor results and substandard reporting. And our Boards were frustrated with the endless saga of accounts that took way too long to resolve and cost way too much in legal fees.

Through an effort of continuous improvement and best practices, we have experienced dramatic success in collections for the condo/HOA industry. Simple adjustments have led to meaningful improvements, such as understanding the best ways to communicate proactively with homeowners, making refinements to payment plans and payment methods, determining the least expensive yet most effective forms of legal action, etc. Accounts that previously took 180 days or more to resolve are now being resolved in an average of 90 days. Legal actions that previously cost thousands of dollars are now being performed for a fraction. This is all the product of continuous improvement and best practices that have found the low-hanging fruit for our industry.

Still, many managers continue to operate in analog. They send their delinquent accounts to the same place they have for decades, using the same regressive policy and practices. Occasionally they will become frustrated with these analog practices, banging on the top of that old TV in an effort to improve the picture. But the rest of the world is watching Netflix in 4K.

I recently installed a digital irrigation controller at my house. It seemed logical enough that this new technology, which gathers local weather data, could make adjustments to my watering schedule. But I had no idea. The system paid for itself in a matter of months and my lawn looks perfect. I am no longer wasting water or dealing with substandard results as a result of my analog system. My lawn has gone digital! And the only question I ask is why I waited so long to do something that was so obviously beneficial?

Shouldn’t you be asking the same question about your collections? Our industry is overwatering one account while another is parched. And if our “lawn” has looked good in recent years, it has not been from the proactive efforts of the legal community, but rather the byproduct of a good economy – even an analog lawn looks good when there is regular rainfall.

Isn’t it time you break free from the analog practice of collections and go digital?

ABOUT THE AUTHOR: GAR LIEBLER

Gar Liebler is the Founder and Visionary of a national real estate services and investment company headquartered in Auburn Hills, Michigan.

His original property management firm, LandArc, was founded in 1985 and grew to operate in multiple states. After selling LandArc in 2015, Gar shifted his focus to value-added services for the community association industry, both as Visionary for LifestyleLink, a digital event management software for highly-amenitized communities, and with the national leader in assessment recovery, Equity Experted.

Gar also serves on various professional boards and charities.

Common Ground: Pandemic Pinch

Featured Img 5
Gar Thumbnail 2

Common Ground: "Pandemic Pinch"

I recently contributed to Common Ground (see page 35 of “Pandemic Pinch”). My position is that pandemics don’t respect economic cycles, and we are going to see a significant downturn in 2021. What’s your opinion? Let me know by submitting a comment in the form below. 

Gar Liebler is the Founder and Visionary of a national real estate services and investment company headquartered in Auburn Hills, Michigan.

His original property management firm, LandArc, was founded in 1985 and grew to operate in multiple states. After selling LandArc in 2015, Gar shifted his focus to value-added services for the community association industry, both as Visionary for LifestyleLink, a digital event management software for highly-amenitized communities, and with the national leader in assessment recovery, Equity Experted.

Gar also serves on various professional boards and charities.

Vaccinate Your 2021 Budget

Featured Img 7

ALERT: CAI Announcement & Six Ways to Vaccinate Your 2021 Budget

CAI just announced an extension of the Moratorium on Foreclosures through the end of the year.   The CAI Board of Trustees also provided the following set of principles for community associations to adopt pertaining to homeowners who face challenges paying their assessments.

  • If an owner is unable to pay assessments on time, the owner should notify their community association to work out a payment plan. Homeowners with a financial hardship should be encouraged to apply for government assistance, if available.
  • Community associations should adopt a moratorium on foreclosures, in cases where the delinquencies are a result of COVID-19, until at least December 31, 2020.
  • Community associations should consider waiving late fees and penalties for owners who face temporary financial hardships due to COVID-19.
  • During the moratorium, community associations should only record liens or other legal complaints when failure to do so jeopardizes the association’s interest.
  • Community associations should use compassionate language in communications with residents regarding COVID-19 delinquent assessments and clearly identify requisite legal notifications, disclosures, and/or disclaimers.
  • Community associations should emphasize the importance of owners paying their assessments on time, if possible.

These principles make sense, but they put our industry in a tough spot.  We are being asked to change the way we collect delinquencies amidst COVID-19, offering more leniency and holding off on liens and foreclosures.  But our communities, which operate as non-profits, need those dues!  Budgeting for 2021 will be a challenge. 

Most economists agree that we are headed for a recession and a slow recovery.  According to the Mortgage Bankers Association, the delinquency rate nearly doubled in the second quarter of 2020.  During the Great Recession, mortgage delinquency rates were an important indicator of delinquencies for community associations. 

Equity Experts, which does collections nationally, identified a 12% increase in August delinquencies, and an alarming year-over-year increase of 38%.  A recent survey of over 100 leaders in the community management industry found that a staggering 81% of participants said that they expect a substantial increase in delinquencies, and over 40% felt that they were unprepared to handle the increased workload.

App Statistics

Here are 6 ways to vaccinate your 2021 budget:

  1. Take a look at August delinquencies.  The momentary absence of Fed unemployment, along with the subsequent reduction, is driving delinquencies. Expect that level to remain until unemployment benefits are adjusted or eliminated.

  2. Look for trends.  How has your AR and collection expense changed in recent months? What happens if you extend that pattern into 2021?

  3. Revisit your budgets from 2009-2011.  No one thought we would repeat the Great Recession, but pandemics don’t respect economic cycles.

  4. Make sure your financial statements show visibility and ROI into all collection costs:
    1. Time and total cost of recovery
    2. Bad debt line item for unrecovered legal/collection fees
    3. Bad debt line item for unpaid assessments

  5. Ask your collector or attorney to defer their fees.  Communities struggling with unpaid assessments can’t afford to pay fees now in the hope that they are recovered in the future. 

  6. Share the pain.  If collection and legal costs are deemed unreasonable, or if they are reduced in order to get a settlement, ask your collector to absorb those costs.  
Collection Costs

According to TechCollect, a data and predictive analytics provider, the average cost assessed to a homeowner for a lawsuit or a foreclosure is around $2,500. Alternatively, their data shows that the average cost of collections without legal action is around $500.  Up to 60% of owners will resolve their account without legal action if given an appropriate opportunity.  Predictive analytics and data mining improve results by providing multiple communication methods for outreach along with a path to the shortest and least-punitive resolution. 

Law firms that perform collections rarely have the resources or incentive to provide effective proactive efforts.  And the collection policies proposed by many attorneys suggest prompt legal action after a single warning letter.  This is troubling for Boards that want to adhere to the CAI principles and avoid costly legal action against their members.

Bottom line: We are headed toward a “new normal” for HOA delinquencies.  Science and data can tell us where to invest our energy for the best results, and legal action will be increasingly rare.  Besides, a compassionate, proactive approach, like the one detailed below, is just good business. 

  • Risk assessment prior to collection action
    • Evaluate risk of bankruptcy, military activity, bank foreclosure, etc.
  • Proactive outreach prior to legal action
    • Phone, email, SMS and Social Media
  • Debtor location methods for effective communication
    • Address, emails, phone numbers, and digital footprint

So, let’s count our COVID blessings: more settlement options and better recovery methods are a positive evolution for our industry.  And the fiduciary obligation of Boards and managers is well-served by finding human-first solutions that reduce the need for legal action.

Collections: Why Race Matters

Featured Img 1

The past year has been difficult and uncertain for our country. A historical election, global pandemic, and a long-overdue reckoning on race are just a few of the life-changing events we’ve all been through. We are all navigating uncharted waters and doing our best to adapt. Amid this unprecedented challenge, racial tensions and inequities have come into focus that requires us to consider whether collection practices within our industry contribute to the problem or create a perception that might result in liability for boards and managers.

As we considered the impact of traditional collection practices, it became clear that these practices often disproportionately impact both the health and finances of certain minority populations.  Being in an industry created to develop, maintain, and improve communities, we must recognize these inequities and make changes to the way we approach delinquent assessment collections. The traditional model of rapid legal action without any meaningful proactive outreach only adds to the unbalanced negative impact on certain groups who may already be suffering. That is why it is more important now than ever to initiate compassionate collections and provide homeowners with the proper education and means of communication to resolve their delinquent account prior to legal action.

A recent survey from Equity Experts of over 100 presidents and leaders in the community management industry around the nation found that 91% agreed that, given the current social injustices and pandemic, community associations should be more lenient with delinquent homeowners who claim hardships. On top of that, a staggering 81% of participants said that they expect a substantial increase in delinquencies, but over 40% felt that they were unprepared to handle such an increased volume of delinquencies. Given this information, it is crucial to analyze the effects the current social and pandemic environment has on community associations and the solution to navigating through it and beyond.

COVID 19, Social Injustice and Community Association Delinquencies

Minorities hit harder in both health and finance

The health effects, both mental and physical, of COVID19 are far-reaching across all demographics, but it is clear that certain populations are affected significantly more. The following is from an April 2020 survey by the Pew Research Center.

Pp 2020.04.14 Covid Health Impact 0 02.2

“Among the public overall, 15% say they personally know someone who has been hospitalized or died as a result of having COVID-19. However, about a quarter of black adults (27%) say they personally know someone who has been hospitalized or died due to having the coronavirus. By comparison, about one-in-ten white (13%) and Hispanic (13%) adults say they know someone who has been so seriously affected by the virus.”

Additionally, APM Research Lab found that black Americans are 3.8 times more likely to die from the coronavirus than white Americans. As concerns mount in these communities about keeping themselves and their loved ones safe, it is understandable that many people may fall behind on their assessments while addressing their health and safety as a more urgent priority. As an industry, we should recognize this potential outcome and be prepared to address their delinquencies with the compassion and empathy they deserve.

To make matters worse, in addition to the virus affecting minorities to a greater degree from a healthcare standpoint, they are also more likely to be impacted by the financial repercussions of the COVID19 pandemic.

Unfortunately, the global financial impact of COVID19 will not be fully realized for quite some time, but it is already apparent how it has begun making an impact on our country. Despite the moratorium on foreclosures from the CARES act and other state–level relief bills, the loan delinquency rate is sharply rising in a way it has never done before.  During the last recession, almost 10 years ago, it was proven that loan delinquency rates are an important leading indicator of delinquency rates in the community association industry, and leaders of our industry couldn’t agree more. From our recent survey, it was found that 81% agreed that delinquencies would increase, with many participants anticipating an increase of around 20%. As delinquencies begin to rise, we should be prepared to handle these in a better way for both those that fall behind and the community associations in which they live. From a May 21st article in USA Today:  

“Mortgage delinquencies surged by 1.6 million in April, the largest single-month jump in history, according to a report from Black Knight, a mortgage technology and data provider. The data includes both homeowners past due on mortgage payments who aren’t in forbearance, along with those in forbearance plans and who didn’t make a mortgage payment in April. 

At 6.45%, the national delinquency rate nearly doubled from 3.06% in March, the largest single-month increase recorded, and nearly three times the prior record for a single month during the height of the financial crisis in late 2008, Black Knight said.”

And while the financial impact of COVID19 will affect almost everyone in some way, the data also shows that minorities will feel the impact of these consequences at a much higher rate. Again, looking to a May 2020 study from Pew Research, they found that it is far more likely for Blacks and Hispanics to have trouble paying their bills due to the COVID19 Pandemic. In fact, nearly 50% of Black and Hispanic Americans believe that they will not be able to cover all or some of their bills during the pandemic.

Additionally, a large majority of those surveyed, (73% for blacks and 70% for Hispanics) indicated that they do not have reserves to cover their expenses for three months. Without the proper reserves to cover their expenses for three months, we are going to be looking at an increase in the number of accounts referred to collections, specifically for black and Hispanic Americans.

Ft 2020.05.05 Covidrace 02

On top of that, unemployment rates have skyrocketed due to the Covid19 Pandemic. All races and ethnicities have suffered catastrophic job losses leading to financial burdens for everyone. However, the unemployment rate for white Americans is starting to decline at a much steeper pace than other minorities, specifically Black Americans, as displayed in the graph below.  What this means is that it is very likely that minority members of our communities will struggle to pay their association assessments due to unemployment.

2020 Unemployment Rates

Negative Impact of Traditional Legal Driven Collection on Minorities

The collective data for these groups paints a potentially frightening picture. It shows that both Blacks and Hispanics are more likely to contract COVID19, and if they do get sick, they are more likely to be hospitalized or die. From a financial perspective, they are more likely to lose their job, and regardless of job loss, they are more likely to have a hard time paying their bills, including their association assessments. And if any or all of these things occur, they are the least prepared to deal with those types of acute financial emergencies because of their limited access to capital. All these facts make legal actions, where a large lump sum payment is often required to stop the process, an especially difficult and worrisome approach for these groups.

We know that our country is experiencing significant financial challenges due to the coronavirus, and that this virus is more likely to infect and kill certain racial groups. We now can see that those same racial groups will be impacted by those financial challenges at a much higher rate. Concurrent with these challenges, we also know that our country is in the midst of addressing social inequalities that very well may have created some financial inequities in the first place. What you may not know is that the traditional legal driven collection methods used by the community association industry makes these problems much worse.

Equity Experts compassionate debt collection with outreach and payment plan options

Based on research from our data partner Techcollect, we found that the average cost to a homeowner for a lawsuit or a foreclosure is typically around $2,500. Alternatively, their data shows that the average cost of collections to a homeowner without legal action is around $500, and that up to 60% of delinquent owners will resolve their account without legal action if given an appropriate opportunity.  An article from ProPublica found that most Americans who earn less than $60,000 per year have only $488 – $3,862 in liquid assets, and for black Americans that number is anywhere between 2x and 4x less given their income bracket. Using that information, it is clear that traditional legal methods of liens plus lawsuits or foreclosures will, for most Americans (certainly minorities) result in a situation where they do not have the money to pay for those costs.

It is extremely important for of all of us in the community association industry to recognize what the data is telling us and to address it head on. It is not a choice or an option to consider; it is a clear and unambiguous moral obligation.

The traditional legal driven collection approach taken by most of our industry, however well-intentioned it may be, has a disproportionately negative impact on certain groups and is a process that does not work particularly well for any group. The socioeconomic factors discussed above as well as potential language barriers for certain groups make legal actions especially difficult for these groups, often resulting in higher negative outcomes and increased financial burdens.

COMPASSIONATE COLLECTIONS

It may seem contradictory, but we are certainly not suggesting that certain racial groups should be treated differently. Community Associations, through their governing documents and day-to-day practices, are inherently focused on equal treatment and adhering to policies that ensure such treatment. So how can you address the present-day inequalities? Our solution is a more thoughtful and compassionate approach for EVERYONE. This compassionate, proactive, problem–solving approach can take many forms, but should include the following.

Equity Experts compassionate debt collection with outreach and payment plan options

A custom proactive approach for reaching past due owners means not just sending a few letters, but should include phone calls, emails, and potentially even text messages or direct messaging through social platforms. The traditional and historical method of pursuing collections usually includes sending the homeowner a single letter to the address provided by the community, and then initiating legal action right away. In 2020, that is both an inefficient and ineffective way to approach delinquent assessments. Using our technology advancement through our partnership with Techcollect, we are now capable of determining the most effective ways to reach out to delinquent homeowners and to collect proactively and compassionately instead of forcing traditional, one-size-fits all methods that just flat out don’t work for everyone.  

Utilizing a custom proactive approach means that finding the information on where to reach homeowners is absolutely essential. Some owners, such as landlords, do not live in their HOA, and regardless of that, snail mail is often ignored, lost, and thrown away.  Therefore, the inclusion of debtor location methods is imperative to a proactive collections approach. Using established partnerships with reliable data vendors we are now able to find the best phone numbers, physical addresses, email addresses, and even social media accounts to reach delinquent owners.  

Offering more comprehensive payment plan options is also vital to providing a more compassionate collections approach. This includes having bilingual agents who can discuss payment options, educating the owners, and guiding them to potential resources for financial aid and support. Community associations should have updated collections policies that provide these guidelines. However, you should also be sure that your collections partner is offering payment plans to your homeowners and empathetically educating them as well. Or, what if a homeowner is facing catastrophic financial difficulties? You should be sure that your collection partner is equipped to handle that empathically and effectively. That is why Equity Experts created RelEEf, to help homeowners get back on their feet. 

Additionally, did you know that Equity Expert’s developed a free tool to help our industry evaluate debtors for payment plan consideration? The Hardship Calculator helps community associations make the best decision for their community, while providing financial assistance resources to homeowners. Tools like the hardship calculator help both managers and board members gather relevant information from the past due owner to determine the best payment options, while offering transparency and compassion. 

TechCollect account creation.gif

MAKING CHANGES IN OUR COMMUNITIES

Using the above recovery methods well before considering legal options provides a more level playing field for members of all racial groups to become educated and knowledgeable about the debt that they owe and how they can address it. This approach also meets the fiduciary obligations of the community association board to refer past due files for collection in a timely manner while avoiding the potential liability of real or perceived discrimination.  

Nobody likes collections, but it is a reality of our industry that cannot be ignored.  It is our responsibility as community association leaders to have these conversations and move beyond the archaic collection methods that have traditionally dominated our industry. The standard, one-size-fits-all legal–driven approaches of the past have provided mixed results and can be especially difficult to manage for certain racial groups. Legal action is an important tool available to community associations, but it should be used only in the context of a comprehensive recovery plan that provides a more proactive approach with more options for resolution. Now is the time to collectively choose a more thoughtful and compassionate path that not only benefits community associations, but society as a whole.

At Equity Experts, we recognize our obligation as a trusted partner for community associations and their members. Collections is not only about financial outcomes, which is why our approach is focused on delivering unmatched results with both compassion and empathy. We understand the importance of legal action and often use legal methods as well. However, we ensure that through compassion and proactive outreach we try everything in our power to educate homeowners and help them pay their assessments before initiating legal action. Part of the way we do this is through our data software partner, Techcollect.  Their unique solutions, including complex data driven collection modeling provides exclusive insights to better understand the best approach to reach owners prior to legal action, and for accounts where legal action is required, more predictable outcomes.  We prioritize being part of the solution for a more just and improved world. Will you do the same? 

Recession Readiness: Gaps in the CAI Foreclosure Moratorium

Featured Img 4

The principles published by CAI on 3/31/20 appear to place a significant burden on managers to make hardship determinations and modify their polices to include extended payments plans, fee waivers, etc.  We offer the following guidance to fill “gaps” we perceive in the CAI Moratorium:

Government Support:  Recent federal government programs are intended to provide full wages to individuals.  With few exceptions, owners should not have a reduction in their income:

  • The SBA 7(a) program is called the Paycheck Protection Program Loan. Employers need to continue providing full wages in order to receive the full benefit of the program. 
  • The CARES act provides an additional $600/week to the unemployed though July 31.  In many cases, The unemployed will get more than their prior wages.
  • Those that were already unemployed get the new CARES benefit and an extension of their benefits through July 31.
  • Individuals making up to $75k (or $112.5k for head-of-household, $150k for couples) will qualify for the one-time federal payment of $1200/person (estimated $3400 for a family of 4). No action is needed to receive this benefit; it will just show up for taxpayers.

Forbearance Programs:  Many private banks (Ally, Chase, Citi, 5/3, PNC, etc.) are offering forbearance or deferment options.  Mortgages, student loans, car loans, credit cards, etc. are all fair game, and many will make an adjustment based on a phone request.  Owners should first seek to reduce these obligations before deferring their assessments.

Dues vs Assessments:  Owners need to understand the relative importance of their assessments and risk to their home before deciding what not to pay.  We don’t like the term dues; it implies something optional or superfluous, like a country club membership.  Assessments, like property taxes, are needed from all members for the operation of their community. 

Wrong Priorities:  We often see owners defer their assessments while prioritizing other debts.  Owners need to understand the potential damage they do to their community and the burden they place on their neighbors when they don’t pay their assessments.

Relief like RelEEf:  Sophisticated operations like Equity Experts already have processes in place to help owners that can demonstrate difficulty in paying their assessments.  Most boards and managers do not have the infrastructure to manage these programs, and they run the risk of FDCPA violations when they try.  Rather than burden your organization, ask your collector to proactively reach out to owners and ascertain their circumstances and willingness to cooperate before pursuing costly legal action.

Communicating these priorities and options to owners can help them stay on track or guide them to other forms assistance so they can still pay their assessments.  This is also an important time to get ahead of internal bottlenecks, update your collection policies, and select a collector with deferred fees.  Our Insights on Recession Readiness address a number of these topics. 

Please take this short survey to let us know if you agree or disagree with each of the principles published by CAI and how you plan to proceed:

Recession Readiness: Paper Maps

Featured Img 5
Gar Thumbnail 2

Do you remember using a paper map?  You chart your course, fold it just right, and then embark on your journey.  No opportunity to anticipate delays or diversions.  Now we use GPS for the most efficient path to our destination.

Most collection policies are like paper maps. 

  • They have a rigid sequence of steps: Boards and attorneys love the term shall: unambiguous, firm, decisive.  But what happens when you have reasonable exceptions? Managers should be empowered as fiduciaries to take appropriate action with some degree of discretion. 
  • They predetermine your path:  Fair is not necessarily Same.  A collection policy that applies the same procedure in every case fails to recognize the value of predictive analytics that can shorten the path to payoffs without legal action.

Current limitations on remote work capabilities highlight a stark risk for managers: Many can’t fulfill the rigid requirements of collection policies with remote staff.  And the increased volume of delinquencies that is sure to come will overwhelm many offices.

The economic crisis presents an opportunity for Boards and managers to update their collection policies and leverage technology in their accounting processes.  They will emerge better and faster as a result.  What will you choose; paper maps or GPS?

Equity Experts recently won an important case that affirms the legality of deferred collection fees and addresses the benefits this approach offers to community association.

Gar Liebler is the Founder and Visionary of a national real estate services and investment company headquartered in Auburn Hills, Michigan.

His original property management firm, LandArc, was founded in 1985 and grew to operate in multiple states. After selling LandArc in 2015, Gar shifted his focus to value-added services for the community association industry, both as Visionary for LifestyleLink, a digital event management software for highly-amenitized communities, and with the national leader in assessment recovery, www.equityexperts.org, LLC.

Gar also serves on various professional boards and charities.

Recession Readiness: Bottlenecks

Featured Img 5
Gar Thumbnail 2

I remember when we built our management software.  We programmed Work Orders to convert to Accounts Payable – totally logical.  But when I walked into the AP department, there were stacks of printed Work Orders!! Guess why? 

They needed to attach the check stub to something!  Um – no, we don’t.  But it took some effort to change that mindset and realize the efficiency we envisioned.

Staff working remotely will expose several bottlenecks (opportunities) in your operation.  What are you doing manually that should be automated? 

One obvious choice is collection operations.  Most still require manual processes that have been in place for decades:

  1. Generate a ledger (direct to PDF or kill a tree; either is silly)
  2. Send ledgers to attorney
  3. Bug attorney for collection updates
  4. Receive attorney invoice and manually apply collection costs to owner ledgers
  5. Provide payoff when requested by attorney
  6. Do final manual reconciliation of delinquency

If your operation looks anything like this… (insert Jeff Foxworthy joke here) you might be dealing with bottlenecks!  Do a quick calculation of the time required for each step and you are probably wasting around 150 hours for every 10,000 units under management (assuming 3% of units are sent to collections).  That is real money!

Management software now has the capability for data transmission that can automate 4 of the 6 steps outlined above.  And it is NOT costly or complicated. 

Deferred collection fees can eliminate the remaining 2 most time-consuming steps; applying collection costs to ledgers and manually reconciling payoffs. 

Here is a short video that shows the automation in action.  What would you do with another 150 hours per month??  Or in the event of a recession, 2 or even 3 times that amount?

Equity Experts recently won an important case that affirms the legality of deferred collection fees and addresses the benefits this approach offers to community association.

Gar Liebler is the Founder and Visionary of a national real estate services and investment company headquartered in Auburn Hills, Michigan.

His original property management firm, LandArc, was founded in 1985 and grew to operate in multiple states. After selling LandArc in 2015, Gar shifted his focus to value-added services for the community association industry, both as Visionary for LifestyleLink, a digital event management software for highly-amenitized communities, and with the national leader in assessment recovery, www.equityexperts.org, LLC.

Gar also serves on various professional boards and charities.