We are in a complicated situation and would like some advise. We carry a mortgage for a town home that is from a month to two months slow pay. They usually pay a late fee when they do pay. The owner of the unit is not paying the association's HOA fees and is now several thousand behind. The HOA has gotten a judgement against the home owner through small claims court. The HOA president wants to foreclose on the unit. All this is in Texas so the HOA could probably successfully foreclose.
If that happens what happens to our mortgage when the asset is foreclosed against? What should we do to protect ourselves? I don't know if the mortgage holder can foreclose or not for back HOA payments owed to the HOA.
I think all this can be worked out if the situation doesn't turn even more ugly but that opinion is not shared by the HOA president.
We are interested in what others have experienced in this situation. We are also interested in an estimate of how much it would cost for the HOA to foreclose and how much it would cost for us to do something.
Not positive for Texas, but your mortgage should survive any HOA foreclosure. That does mean that you'd likely need to foreclose on the new owner, unless there is sufficient equity and the new owner "willingly" took on your mortgage-not usually the case. Generally your safest bet would be to simply pay off the HOA to protect yourself. Seems like you're going to need to foreclose at some point though. Your note and mortgage documents, along with state laws, will determine if you can foreclose due to non payment of the HOA, but I'd think you could if you had to advance the HOA fees to avoid a foreclosure by them. You need a local RE attorney.
It sounds like you need to be proactive and get ahead of the HOA.
What if we accelerated the loan? Now how would that work?
@Chuck Drinnan There is a case law I heard from Las Vegas, Nevada. HOA foreclosed on the apartment building and wiped out senior position lien and junior liens. Look in your promissory note and see if there is an acceleration clause. Does your note say anything about keeping the property insured, property maintained, tax paid, and HOA paid? If owner didn't fulfill the terms, you may be able to call the loan due without explicit acceleration clause.
Not legal advise. Consult a RE lawyer.
The Nevada loophole has nothing to do with Texas.
Accelerating the loan, if done properly as per the terms of the note, is the first step in foreclosure. You need an RE attorney experienced in foreclosures.
I agree with @Wayne Brooks I would first look into paying off the HOA lien and after that look into foreclosing on the property.
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