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Recession Readiness: Gaps in the CAI Foreclosure Moratorium

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:

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