Can My Homeowners’ Association Foreclose on My Home?

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You’d have to be living with your head in the sand not to know that failure to pay your mortgage will eventually result in foreclosure by your lender.

Banks and other mortgage lending firms generally only care about one thing when it comes to loans they’ve granted, and that is: getting their money back. When approving mortgage loans, lenders are extremely selective for a reason. They want to ensure that you will be able to handle the repayment schedule of your loan.

Failure to do so, even missing a single mortgage payment, sets off a red flag within most lending corporations. You will be contacted soon after a payment due date elapses. If you missed a payment due to forgetfulness, your lender will do everything they can to collect the payment (almost assuredly with a late fee attached) from you over the phone.

Further missed payments will force your lender’s hand into filing foreclosure against you, which can ultimately lead to the  repossession of your home. Although it may seem drastic, banks and lending companies depend on borrowers’ loan payments in order to stay in business.

As New Jersey foreclosure rates have soared over the past few years, most homeowners have become familiar with the concept of foreclosure for failure to pay their monthly mortgage bill. What many New Jerseyans don’t know is that their mortgage lender isn’t the only entity that can foreclose on their home.

Many New Jersey residents live in housing developments that are ‘governed’ by homeowners’ associations. These organizations, often referred to as HOAs, are in charge of making rules for the development and, in turn, enforcing those rules. Residents must pay monthly dues to their HOA, as they also oversee the care, upkeep and repair of common areas in the development.

HOA dues in New Jersey typically range from $200-$400 per month, but can be more or less depending on several factors, including: the average property value within the development and the existing amenities that require maintenance (tennis courts, swimming pools, parking garages, fitness centers, security systems and gates, landscaping and more).

When facing financial difficulties, many homeowners in New Jersey stop making their HOA payments and keep making their mortgage payments, thinking that this will keep them out of foreclosure. Unfortunately, that simply isn’t the case.

Falling behind on your homeowners’ association dues can result in your HOA putting a lien on your property. Failure to bring your past due HOA fees current gives your homeowners’ association the right to foreclose, even if you are current on your mortgage!

Just as lenders must file foreclosure via the NJ legal system, so must homeowners’ associations. This means that your HOA can file a foreclosure lawsuit against you in the same manner that your lender can if you stop making mortgage payments.

What happens to my mortgage in the case of a HOA foreclosure?

If your homeowners’ association successfully forecloses on your home, it can either continue making mortgage payments to your lender or not make any payments. Many HOAs will rent out the property (while making no mortgage payments) and wait for the lender, whose liens take precedence over the HOA’s liens, to file a second foreclosure.

Either way, the homeowners’ association will achieve its goal of reducing or resolving its financial loss caused by your failure to pay your HOA dues. Takeaway: your mortgage payment and your homeowners’ association dues are equally important, and failure to pay either can cause you to lose your home to foreclosure.

 

Image credit: dodoyf
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