Las Vegas Sun NewsB of A sues 28 Nevada HOAs, collection agencies in lien dispute
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18 October 2012
2 a.m.
Bank of America is suing 28 Nevada homeowner associations and their collection agencies in the continuing dispute over charges that HOAs have been hitting homeowners and buyers of foreclosed homes with inflated bills for past-due assessments and collection costs.
The bank filed suit Tuesday in Clark County District Court charging that state law limits the ''super-priority" first-position liens that HOAs can place against homes to an amount equal to nine months of HOA assessments -- but that the HOAs are "improperly'' filing liens demanding payment of attorney's fees and collection costs on top of that.
These liens typically cover unpaid HOA assessments that accumulate while homes in foreclosure sit vacant, as well as costs to collect those unpaid bills. Charges that the HOAs and their bill collectors have been inflating the liens are pending in numerous lawsuits, with many attorneys expecting the Nevada Supreme Court or the Legislature to ultimately decide what limits should be placed on the liens.
In one recent example, a homebuyer was forced to pay off a $5,895 lien placed by the Spring Mountain Ranch HOA, but charged in a lawsuit that state law limited the HOA’s lien authority in that instance to $357, with the remainder representing an "unlawful lien amount."
But HOAs say that with the glut of foreclosures, their budgets have been decimated as no one pays monthly assessments for homes sitting vacant. The HOAs say that to maintain their revenue and needed community services, they need to recover that money from the new owner and that's why they file liens against the properties. The liens have to be cleared, or paid off, in order for the buyer to receive a clear title to the home.
Bank of America's lawsuit said its problem is that it "services thousands of mortgage loans in Nevada on behalf of many holders of first deeds of trust," but that when it tries to pay off the HOA liens, its efforts have frequently been rejected because it refuses to pay more than the nine months of assessments.
That prevents it from clearing the superpriority lien from the titles of properties securing its loans, the lawsuit says.
"The court should issue a judicial declaration establishing an association's super-priority lien does not include attorney's fees or collection costs. Under the plain language of (state law), only nine months of regular, budgeted common assessments are included in the super-priority amount," the suit says.
Bank of America also claims in the suit that some HOAs wrongly refuse to provide it with payoff information or accept its payments "in part because they wrongly contend Bank of America has no relationship with the association."
The HOAs and associated companies sued in this week's Bank of America lawsuit are:
Alessi & Koenig LLC, Aliante Master Association, Allied Trustee Services Inc., Angius & Terry Collections, Anthem Highlands Community Association, Assessment Management Group Inc., Asset Recovery Services Inc.
Also, Brias Homeowners Association, Canyon Crest Community Association, Cortez Heights Homeowners Association, Elkhorn Community Association, Elkhorn-Cimarron Estates Homeowners Association, GJL Inc. dba Pro Forma Lien & Foreclosure.
Also, Heritage Square South Homeowners Association Inc., Homeowner Association Services Inc., KGDO Holding Company DBA Terra West Property Management, Las Brisas Homeowners Association, Leach Johnson Song & Gruchow, Montecito At Mountains Edge Homeowner Association, Mountain's Edge Homeowner Association, Mountain's Edge Master Association.
Also, Nevada Association Services Inc., Phil Frink & Associates Inc., RMI Management LLC DBA Red Rock Financial Services, Sierra Ranch Homeowners Association, Silver State Trustee Services LLC, Southern Highlands Community Association and the Stonefield II Homeowners Association.
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The mortgage holders are the responsible ones and not the new homeowners. These mortgage holders are getting a free ride again while we the homeowners are stuck paying their bills. We need a law that THEY CAN'T PAST THEIR RESPONSIBILITIES ONTO TO NEW HOMEOWNERS. As far as I am concern The Stae needs to protect us not these RICH BANKS.I pay my monthy fees and so should you.It bad enough the homeowners are walking away and the mortgage holders shouldn't be allowed to either.
why is there a 9 month limit? What happens when all those houses are (u cant say empty cause a lot of people just stopped paying but stayed) stop paying for the costs? the costs just go away? its someone elses problem? get out of my way, im first... Walmart!
I'm not going to mention any names here... but we just had one of the Homeowner Associations and Law Firms mentioned in the lawsuit above auction off a HOA lien for $150 --- while we were negotiating with Bank of America on the short sale and were going to pay the HOA over $5,000 to clean it up. Talking to another agent with a short sale they were negotiating with Wells Fargo in the same community, the same thing happened to them.
Best interest of the Homeowners in the Association? I don't think so. Everything completely reeks.... especially when the Association KNEW we were working on short sale negotiations.
I don't think you understand.... The previous owners / borrowers are the ones that did not pay their monthly fees. The State law previously allowed the HOA's to collect up to six months of past due monthly fees on a foreclosed property, the state legislature raised it to nine months. Nowhere in the NRS does it state that the collection companies can tack on their collection costs of thousands of dollars onto that nine month superpriority lien - but they do... in acting for the HOA that hired them. That makes the HOA liable for the collection companies' actions.
The new owner (whether it be the bank or investor) of the foreclosed house is paying that super priority lien for fees that were accrued prior to their ownership plus the collection costs that are illegally being tacked on.
Here is a simple analogy --- your neighbor buys a couch with his credit card. The neighbor sells the couch to you for cash. The neighbor doesn't pay the credit card. The credit card company now wants payment from you because you now own the couch. Including all past due interest, late fees, collection costs, etc.... Does that seem fair?
I, as most investors and banks that own foreclosed homes, feel it is fair to help the HOA become whole again. The part that is unfair is having the collection costs tacked on illegally and those collection costs being overly inflated and not being collected from the parties that incurred them. If the super priority lien was raised to more than nine months of past due fees with no monies going to collection companies, these new owners would be fine with the monies going to the HOA's.
Most collection companies have to comply with the Fair Debt Collections Act. I know that they cannot come after me for my neighbor's debt, but in this case they do.
The Democrat Party and the juveniles in the media should pay for their 2007- 2008 campaign rhetoric, which is what caused most of this.
Teamayres - You have hit the problem directly on its head, the state legislature is the one who has caused this problem with the arbitrary limitation of 9 months of HOA assessments. This limitation, along with banks unable to foreclose as quickly as they once were able to due to the number of lawsuits and court decisions have left numerous people in homes that are not paying the assessments. I have a neighbor who brags about living in the house now for over two years without paying the mortgage or assessments along with the HOA fines and interest.
I agree with your analysis that most HOA's would be happy to recover the past due assessments and waive all fines and interest if they were assured that they would be able to recover the past due assessments. The state legislature needs to take this up during the next session and clarify this subject.
Arbitration clauses for B OF A cusomers but they want to use the courts? Gee these corporations complain about lawsuits but there the first to show up in the courts.
What do homeowners do when there is anarchy/no law enforcement for HOA embezzlement and fraud?! Phil Frink & Assoc. is listed as a defendant in BofA's case. Frink is also collector at Lakeside Plaza Condominium Association in Reno where they had approx $1 million embezzlement by the former HOA president - resulting in approximately $1-$2 million in illegal foreclosures. Washoe County District Attorney (Case #406537). Within approx 3-4 months' time Frink & Lakeside tacked on another $4,000 EXTORTION onto my bill without any accountability - in clear violation of Fair Debt Collection Practices Act (and several other federal and state laws). In addition, one board director stated (with regard to those that questioned the embezzlement) "We're going to sanction you all out of here". Lakeside Plaza's intent was clear. Lakeside Plaza also had a problem with kickbacks. State of Nevada just sent Lakeside Plaza a nice little warning letter - big deal! In the meantime, board directors were approving "big ticket" items against homeowners' approval - a big opportunity for kickbacks. A friend of mine over at Truckee River Highlands also had a similar problem with Frink's extortion. Problem is - good luck suing for illegal foreclosure and extortion in Nevada when you have "in the pocket" arbitrators and federal judges like Kent Dawson. Yet, police and FBI say this is all a "civil" matter. Just how civil is it?!
As far as my mortgage and HOA agreement - I never agreed to pay embezzlement and extortion. My HOA breached contract when they assessed us and embezzled our money. Due to embezzlement and illegal foreclosure of my home (Washoe County District Attorney case #406537), I will look forward to 7-10 years of derogatory credit because Fannie Mae is trying to collect on a mortgage for a home I no longer live in due to fraudulent foreclosure by Lakeside Plaza CONNED-ominium Association. So much for this so-called "American Dream"! More like the "American Scheme"!
It took us over 9 months to short sell my wife's home. We had two banks to deal with and our realtor told us they the worst banks they had ever dealt with. During that time, our realtor advised us to make sure to make our HOA payments evey month (and we did) so as to avoid this problem. Considering the fact that we were not paying the mortgage for this period, the HOA fee was a small thing to pay while waiting for our SS to go through.
@FVbump82 -- Always the best policy to avoid all of this silliness to begin with. Something rarely discussed in the media is the short sale deals that are ruined due to excessive HOA "penalties" tacked on that nobody wants to pay for when they get racked up to obscene numbers.
Anybody short selling should certainly try to keep their HOA dues current to avoid the complications that could ruin what would otherwise be a successful short sale. Especially now that some certain HOA's think it's in the best interest to auction off the HOA liens during short sale negotiations.
I ask how one can lose their home during a short sale. Certified mail is sent to all lien holders and the homeowners last known address. There were plenty of ways to know for more then 6 months that collections are in process. The biggest problem I see is the banks and homeowners don't communicate to all other lien holders and just ignore bills. As one stated there is no reason not to pay a small monthly HOA fee to prevent additional fees. Sometimes it takes spending money to save money.
The biggest question to ask is it fair for the HOA (All paying homeowners) to pay more to attempt to collect from non payers. If a HOA starts going after a non payer and it takes a year before the bank even files the defency of the lien and the bank forecloses before the HOA the HOA gets 9 months. Often the hard costs of collections can equal more then the 9 months. If the HOA had to pay those hard costs the HOA would actually spend more money collecting the 9 months then what they recover at a super priority case. Don't forget the HOA still is writing off a large amount of bad debt often as one states their neighbor has paid no one in 2 years. That means atleast 15months in a foreclosure super priorty will be written off as bad debt to never be seen again.
If the HOA is at that risk then they should not send anyone to collections. Now the problem is more bad debt. Use AZ as an example where collections are done differently due to laws there. I have seen reports that show the average Arizona HOA has 20% and greater bad debt yearly which means that all paying homeowners pay a higher assessment to makeup that lost. How fair is that? In NV I bet it averages at less then 5% of the yearly budget on average. Imagine all the paying homeowners seeing a 15% increase in their assessments to make up for the non payers. In many cases it has already happened but could become a lot worst.
One thing that I have heard as an idea to at least fix the collection of assessments moving forward is to make HOA assessments part of the escrow in a mortgage. Now the bank will have a large responsibility as well to ensure that assessments are paid and HOA and all paying homeowners would not have to carry as many non payers.
Now collections will still be required with the # of cash purchased homes that don't have mortgages, but these owners would be more likely to not fall behind on their assessments as they don't want to lose something they have 100% equity in.
@forthetruth - I think making the HOA monthly assessment part of the mortgage impound account (like insurance and property taxes) is a good idea. The HOA's need to find a way to make fees structures and past due accounts public like property taxes and SIDS/LIDS assessments are....