If your homeowners association Board is initiating an HOA foreclosure process, did you know that there are two different types of foreclosures?
An HOA Board will initiate a HOA foreclosure when a member in the Association is delinquent on paying their assessments and refuses to pay them after all proper collection measures have been taken by the Association. An HOA foreclosure has two paths it can take: judicial or non-judicial. Basically, the difference is that a judicial foreclosure involves a court process while a non-judicial foreclosure does not. It’s significant to know the main characteristics about each type because it can affect the entire foreclosure process.
Judicial HOA Foreclosure
A judicial HOA foreclosure is the less common of the two. The process also takes much longer than a non-judicial foreclosure. Some states require a judicial foreclosure process. This is when it’s important for an HOA Board to prepare for possible defenses from the homeowner because a judicial foreclosure gives the homeowner the opportunity to oppose the foreclosure. It also assures the homeowner that they can’t lose their home unless a judge signs off on the foreclosure. If a home loan is secured by a mortgage, then the foreclosure will most likely be a judicial process.
Non-judicial HOA Foreclosure
A non-judicial foreclosure is more likely and is usually customary when a loan is secured by a deed of trust. Typically, the deed of trust allows the foreclosure to take place outside of court. A non-judicial foreclosure can go much faster than a judicial process. The type of process an HOA foreclosure goes through depends on individual state laws.
HOA Foreclosure in California
Under California law a non-judicial process is the most common type of foreclosure. Most lenders prefer this process because of the minimal costs and faster timeframe as opposed to a judicial process. When beginning the foreclosure process an Association is required to mail a notice of foreclosure to the homeowner. The owner then has a minimum of three months to object. After this period, the HOA can sell the unit at auction. Non-judicial foreclosure in California also gives the homeowner a 90-day right of redemption period after the sale of the home, when the homeowners can try to buy it back.
On January 1, 2013 the Homeowner Bill of Rights, a new California law, went into effect. It changes some aspects of the California foreclosure process in order to better protect homeowners and would be a valuable resource for your HOA Board to read.
Be sure to determine if your state uses a judicial or non-judicial process because this will affect the process, procedures, and defenses that are raised by homeowners. It’s also important to reference your governing documents and state laws to familiarize yourself with the HOA foreclosure process that applies to your Association.