As we have been discussing in previous legal updates, foreclosure during the pandemic has been a difficult decision for boards. They are facing the challenge of honoring their obligation to pursue past due assessments timely while balancing the importance of public safety and compassion towards their neighbors. As we have done in our previous updates, we want to provide you with some guidance on how you should approach foreclosures as we move into the new year.
While the decision if and when to initiate legal action is nuanced, we believe strongly that up-front proactive communication prior to foreclosing or initiating a lawsuit is unquestionably important. If Equity Experts has been working your delinquencies, almost every owner has received multiple communications through various channels offering both payment and settlement options, as well as assistance for those facing hardship. We have found that documenting proactive collection attempts prior to foreclosure lessens risks and improves recoverability when those actions are required.
For the financial health of the community, it is imperative to collect all past due assessments in a timely manner. There are several ways communities, through their collection partners, can begin their collections through compassionate outreach opportunities, including not just written communication, but also phone calls, emails, or other methods. Communicating with a past due owner in a way that is most convenient to them not only resolves accounts more quickly, but it also provides the homeowner a better experience and promotes the type of goodwill and partnership that helps your communities thrive.
NATIONAL FORECLOSURE RULES & REGULATIONS
The government halted all foreclosure and eviction action on federally backed loans through the CARES act and again through executive order.
On December 27, 2020, the President signed into law the Consolidated Appropriations Act, 2021. Section 502 of Title V of Division N of that Act extends the expiration date of the CDC Order titled, “Temporary Halt in Residential Evictions to Prevent the Spread of COVID-19” (85 Fed. Reg. 55292, September 4, 2020). The new expiration date is January 31, 2021 unless extended, modified, or rescinded.
The Department of Housing and Urban Development extended a ban on evictions and foreclosures for homes backed by the Federal Housing Administration (FHA) through February 28th, 2021.
The CAI recommended that community associations adopt a foreclosure moratorium through January 31st, 2021. However, the moratorium also mentions that any homeowners who cannot pay their assessments due to financial hardships need to contact their community association to work out a payment plan. That is why, at Equity Experts, we work hard to communicate with any delinquent homeowners prior to recommending legal action.
Additionally, in “Covid19 – The Importance of Understanding the Financial Model of Community Associations”, CAI advised that “Community association boards of directors have an obligation, by statute, to act in the best interests of the corporation and one of these actions is to work to ensure the financial health of the community. One way to do this is to continue to manage the financial affairs, by collecting assessments from the owners.”
Assessments for many community associations are the only source of income and are used to pay most of the association’s expenses. Unfortunately, these expenses haven’t gone away with the outbreak of COVID-19. In fact, the CAI has found that in some cases expenses have even increased due to hiring additional cleaning services and/or consulting with legal counsel to determine how to navigate through these unprecedented times.
North carolina - foreclosure rules, regulations, and guidance
Each state also has its own set of rules, regulations, and guidance that can vary throughout the state even on a county and local level.
In North Carolina, Chief Justice Paul Newby issued a directive leaving court operation decisions to local jurisdictions. For instance, in Wake County, the Chief Judge has decided to hold virtual hearings.
At Equity Experts, we monitor each state, county, and city to ensure we stay apprised to any changes in foreclosure rules, regulations, and guidance. If there is any specific information you need that we are not addressing, including additional county court operational procedures, please reach out to us at [email protected].
As your partner and trusted advisor, we will pursue legal
action at the direction of the board. It is our job to ensure we let our clients know about risks we are aware of so that they can make an educated decision for their communities.
For those concerned about any continued moratoriums or the implication or perception of foreclosing in your community, rest assured that foreclosure, like anything else, is a process. Taking the first step towards addressing the delinquency will allow the owner an opportunity to recognize the seriousness of the debt and address it timely. Any actual sales will still be several months in the future.
Additionally, if you are able to reach the past due owner prior to beginning legal action you can evaluate any hardships they may be facing, as well as their ability and willingness to repay their balance through a payment plan. At Equity Experts, we utilize a Hardship Calculator to help determine the level of financial assistance or forgiveness that is necessary for any homeowner given their financial situation.