Question:
I'm the president of a small not-for-profit water association. We have dealt with a number of home foreclosures – some were abandoned and owed water bills, association dues and fees. All the banks involved except one have completed the foreclosure process and paid us what was owed. However, one lender has not foreclosed, refuses to take possession of the property and has not paid us for two years. What can we do?
Answer:
In some cases, homes are in a state of financial limbo when the mortgage is unpaid but the lender does not foreclose. Since the property title has not changed hands, the lender can say that it literally does not own the property and therefore has no obligation to pay taxes, maintenance, water bills, etc. You will be advised to speak with the homeowner who – of course – no longer lives there, but remains responsible for maintaining the property.
Given that foreclosure is the leverage that lenders have in the event of nonpayment, it may seem strange why lenders would not act quickly and forcefully to foreclose upon borrowers who don't pay. However, by not foreclosing, the lender keeps the borrower responsible for the costs of ownership.
At the same time, the lender may hope that the borrower pays the bills or at least that local property values rise so that when there is a foreclosure, the loss is not so great.
The solution to the problem will likely take place after months or years when the state moves to foreclose for unpaid taxes or – if water and sewer bills are a lien – when your association seeks a foreclosure. At that point, the lender will have to pay up or lose the property. In all likelihood, it will pay and finally take ownership.
For specifics, speak with your county or state attorney regarding any governmental actions to foreclose. Speak with your association's attorney regarding the rights of your organization to do the same.
Email peter@ctwfeatures.com. Due to volume, not all questions may be answered.
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