Purchased a HOA foreclosue, now what?

[Tammy Spearman]

We are in FL. Without knowledge purchased a HOA foreclosue with a 1st lien. The 1st lien is in pre-foreclosure. The homeowner's were in the process of negoiating a loan mod so the foreclosue is on hold. I dont think the bank knows about the HOA foreclosue. The homeowner has left the property. How do we negoiate with the bank to rid the 1st lein? It is a Fannie Mae backed loan with BofA. Is it possible to make an offer to buy the note from Fannie or BofA? Any tips, ideas, etc?
Thank you.

[Scott Hubbard]

Originally posted by Tammy Spearman:

We are in FL. Without knowledge purchased a HOA foreclosue with a 1st lien. The 1st lien is in pre-foreclosure. The homeowner's were in the process of negoiating a loan mod so the foreclosue is on hold. I dont think the bank knows about the HOA foreclosue. The homeowner has left the property. How do we negoiate with the bank to rid the 1st lein? It is a Fannie Mae backed loan with BofA. Is it possible to make an offer to buy the note from Fannie or BofA? Any tips, ideas, etc?
Thank you.

First, you purchased a home in which the HOA took the action? In FL, do HOA liens have superior position to mortgages? If the HOA took action, then I presume this is the case. If so, Fannie Mae will have to pay all superior in order to be able to resell the property. For this, you can research your state's statutes to see if associations have lien priority or call a real estate attorney. If they do have superior lien rights, then Fannie Mae may have to pay you off which means the amount of the original lien + lawful interest (10% usually) + legal fees. If you overpaid for the original lien amount meaning the lien was bid up, you may not be entitled to repaid on that premium amount. Your going to want to make sure you can be contacted easily if and when this happens so you can get paid so recording a notice in the publiec record is good policy. Also, depending on your state's lien laws, you may be required to have a third-party (attorney usually) collect the debt. So, in other words, get an attorney.

If, however, the HOA does not have a superior position rights, your are now in second postion. In this case, it will be key to locate the owners and try to work a deal through them with Fannie Mae. This will likely not work out since their is no longer incentive for the borrower since they will not get their house back.

Additionally, You will not likely be able to purchase the Note from Fannie because they normally do not sell them individually if at all.

Since you are not the borrower, there is no way you can do a workout without the sellers and frankly if your in an inferior position, you have no leverage. I have seen people buy liens at auction before only to find out they bought in second position.

HOA liens are considered personal debt in many states and you may pursue the borrowers and try to collect the debt or even sue to get a judgment. Not cheap to do, so you should consult with an attorney before so doing. If you get a judgment, you might be able to garnish wages. An alterntive might be to sell the debt to a third-party collector, however, this usually menas you will only recover pennies on the dollar.

Good Luck!