By: Kevin Kozar, Operations Manager, Red Rock Financial Services
The creation of SB 306 in October 2015, with respect to the Super-Priority, as well as the actions of lenders prior to and after SB 306, has created a climate of confusion for many. As a result, I would like to take this opportunity to bring some clarity to the current situation, so that you can make an informed decision with respect to foreclosures. I am not an attorney, and to be clear, I am not giving you legal advice. I encourage you to consult with your attorney.
SB 306 is a law passed by the legislature in October 2015 that made it clear that collection fees were part of the Super-Priority.
Red Rock Financial Services (RRFS) made many changes to its policies and procedures effective January 1, 2016 in an effort to better serve you, to increase the recovery to you and to take advantage of the current climate.
The lenders are now paying the Super-Priority at the default stage (currently 99%). Previously, the Super-Priority was being paid primarily at the sell (foreclosure) stage. This means that on the vast majority of new accounts placed in our office, the result will be 100% of your assessments getting paid and eliminating the need to proceed to foreclosure. (The default stage is usually four to five months. Super-Priority payments cover up to nine months of assessments).
This has also created a change in the dynamic for the homeowners, as once they are educated on the Super-Priority they are choosing to pay-in-full to avoid their lender paying the Super-Priority and adding the amount paid to the end of their mortgage. Also, 11% of homeowners, when given the option of a payment plan or letting their lender pay the Super-Priority and having the amount added to the end of their mortgage, choose to have the lender pay the Super-Priority.
The question of whether to foreclose if the HOA is not made whole as outlined above is, as always, up to you. Again, please consult with your attorney. You should be aware of the following:
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The creation of SB 306 in October 2015, with respect to the Super-Priority, as well as the actions of lenders prior to and after SB 306, has created a climate of confusion for many. As a result, I would like to take this opportunity to bring some clarity to the current situation, so that you can make an informed decision with respect to foreclosures. I am not an attorney, and to be clear, I am not giving you legal advice. I encourage you to consult with your attorney.
SB 306 is a law passed by the legislature in October 2015 that made it clear that collection fees were part of the Super-Priority.
Red Rock Financial Services (RRFS) made many changes to its policies and procedures effective January 1, 2016 in an effort to better serve you, to increase the recovery to you and to take advantage of the current climate.
The lenders are now paying the Super-Priority at the default stage (currently 99%). Previously, the Super-Priority was being paid primarily at the sell (foreclosure) stage. This means that on the vast majority of new accounts placed in our office, the result will be 100% of your assessments getting paid and eliminating the need to proceed to foreclosure. (The default stage is usually four to five months. Super-Priority payments cover up to nine months of assessments).
This has also created a change in the dynamic for the homeowners, as once they are educated on the Super-Priority they are choosing to pay-in-full to avoid their lender paying the Super-Priority and adding the amount paid to the end of their mortgage. Also, 11% of homeowners, when given the option of a payment plan or letting their lender pay the Super-Priority and having the amount added to the end of their mortgage, choose to have the lender pay the Super-Priority.
The question of whether to foreclose if the HOA is not made whole as outlined above is, as always, up to you. Again, please consult with your attorney. You should be aware of the following:
- If the Super-Priority has been paid and you proceed with foreclosure based on current data, the chance of the property selling to a third party and not reverting to the HOA drops from about 95% to 75%.
- There is no guarantee that a property will sell, so you should consider the ramifications of the property reverting to the HOA, including the collection fees.
- Federal collection law (FDCPA) prohibits threatening any type of legal action, including foreclosure, if it is not your intention to foreclose. In other words, using the threat of foreclosure just to “scare” a homeowner into paying is a violation of federal law. RRFS does not violate the law. Please consult with your attorney on this matter.
- Many lenders filed suit against HOAs for wrongful foreclosure on foreclosures that took place prior to SB 306.
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