1st Is Current HOA Is Forclosing...What To Do?
The homeowner is in major default with her HOA dues but is current with her mortgage. She wants help, but wants to stay in the home. How should I handle this situation?
Can the HOA actually wipe out the 1st position? How does an HOA actually forclose on a property?
I don't think I can do a short sale here, what can I do for the homeowner and can I make any $$$ doing it.
Thank,
Joe
In my state, HOAs can and do actually foreclose. The HOA has a junior lien position, so their foreclosure will not wipe out the mortgage loan. Instead, the foreclosure sale will be for the HOA lien amount "subject to" the first mortgage balance. The successful bidder will pay off the HOA lien but will still have the first mortgage in place.
No short sale opportunity here if the mortgage is current. What you can do is have the homeowner give you a second mortgage for the HOA liens amount then payoff the HOA lien. Now when the homeowner defaults on your second mortgage note, you can foreclose and take possession of the property subject to the first mortgage. Meanwhile, should the HOA file another lien against the property for unpaid dues, your foreclosure will wipe out their lien since their lien will be subordinate to yours.