July 1st Fannie Mae Requirement Gives HOAs a Big Assist in Collecting Unpaid Assessments from Mortgage Servicers

ARLINGTON, Va., June 4, 2012 /PRNewswire/ -- A new rule from Fannie Mae taking effect on July 1st is going to help many homeowners' associations (HOAs) collect monies owed them by mortgage servicers, according to Matt Martin, chairman of Sperlonga Data & Analytics, an Arlington, Virginia-based company focused on helping bridge the gap between HOAs and the mortgage industry. 

The announcement on the GSE's website reads, "Fannie Mae requires servicers to protect the priority of the mortgage lien and to clear all liens for delinquent homeowners' association (HOA) dues and condo assessments on properties acquired through foreclosure or deed-in-lieu of foreclosure."  The GSE mandates that servicers advance payments to HOAs when borrowers are 60 days delinquent on amounts owed their associations if the status of the lender's first mortgage position is at risk.  In the case of foreclosures or deeds-in-lieu of foreclosure, such liens must be cleared no later than 30 days after the foreclosure sale or deed-in-lieu acceptance.

Matt Martin, Sperlonga Data's chairman and founder, says that it is a case of good news and bad news for both sides.  HOAs and mortgage servicers both want to get unpaid assessments resolved, but they often don't know how to make it happen -- many times servicers aren't even aware that a HOA is associated with the property.  "It is typical for lenders not to keep records of HOAs when they originate loans," Martin says.  "As a result, they aren't able to contact people at the association, and that problem is compounded by rotating resident officers and changing HOA contact information.  Furthermore, HOAs seldom know how to contact the right person at the loan servicer to present a claim for unpaid accounts. This really complicates things, especially in 'super-lien' states."

In the 16 super-lien states and in the District of Columbia, HOA liens for unpaid accounts can take precedence over lenders' first lien positions, meaning that their interests can be wiped out in some cases.  With Fannie Mae formalizing the requirement that these situations be quickly resolved, the GSE is putting servicers' feet to the fire while also giving HOAs a big assist in their collection and property stabilization efforts.  "Associations need these monies to fund their operations," Martin observes.  "When HOAs are underfunded, communities suffer and property values decline.  That's not good for anyone."  The Community Associations Institute, CAI (CAIonline.org), the nation's largest trade association of HOAs, agrees. 

"High delinquency rates place tremendous pressure on associations to meet their obligations to the homeowners who are paying their fair share," said CAI Chief Executive Officer Thomas M. Skiba, CAE, in a press release. "When some owners -- including lenders that have foreclosed on homes and now own them -- don't pay their share, other homeowners often must make up the difference in higher regular assessments or special assessments. Associations must still pay their bills."

But how do servicers and HOAs find one another?  "This is why I started Sperlonga, because getting HOAs and servicers in touch with each other was a major challenge," says Martin.  He founded the company in early 2011 when he discovered that unpaid HOA accounts were getting in the way of closings on properties his company, Matt Martin Real Estate Management (MMREM), markets for HUD and other investors. "The contact information for the HOAs was simply unavailable," he recalls.  "So we set about creating a national database for homeowners' associations and developed technology to help HOAs submit claims for payment to the correct servicing contacts."  

So far, Martin says, Sperlonga has collected information on about 225,000 of the estimated 350,000 HOAs that blanket the country and represent as many as 25 million U.S. residences.  The Community Associations Institute has around 35,000 members for whom it provides many essential services, but is disadvantaged by the fragmentation of the market and has been able to help only about 10 percent of the associations out there, Martin notes. "Our work is intended to benefit CAI members and all the HOAs across the nation.  Now servicers need help to comply with Fannie Mae's requirement," he says.  "We are able to provide that assistance to the HOAs."

HOAs can contact Sperlonga Data & Analytics through its website (SperlongaData.com) to register their HOA, the addresses contained within the HOA, and their claims for payment. Servicers may also contact Sperlonga via its website in order to find out if they have claims or liens outstanding.  Since the Fannie Mae guideline also calls for servicers to advance payments to HOAs when monthly assessments become 60 days delinquent, HOAs are leaving money on the table if they don't keep in touch.  "We offer a tracking service for mortgage servicers on late HOA accounts, and not just in super-lien states," Martin notes.  "HOA dues always go unpaid before the mortgage payment, so tracking delinquencies provides an early warning for servicers when problems are coming on their loans.  HOAs benefit with improved cash flows," he says, "but they have to establish contact."

He also cautions homeowners' associations not to pad claims with excessive legal fees and late charges, as Fannie Mae will not reimburse servicers for those costs.  "Lenders are responsible only for assessments due during their interval of ownership, not typically for the amounts unpaid by the foreclosed homeowner," Martin says.  "Associations will sometimes try to make up for those losses by inflating their claims, but they won't fly on Fannie Mae's loans."  Nonetheless, he feels that Fannie Mae's desire to protect their first mortgage position will help HOAs stay healthy by mandating that servicers actively and promptly seek resolution for claims.  "We are here to assist, whether in super-lien states or in other areas," Martin says.

About Sperlonga Data and Analytics
Based in Arlington, Virginia, Sperlonga Data and Analytics is an award-winning affiliate of MMREM, a national asset management firm whose clients include multiple federal agencies and private sector servicers, investors and insurers.  Sperlonga Data and Analytics was created to provide a centralized interface for homeowners' associations (HOAs) and servicers in order to help stakeholders minimize losses associated with transaction delays and lost revenues caused by HOA claims.  The recipient of an Innovations Award from the PROGRESS in Lending Association in 2012, the company also provides additional outsourced management services for the clearing and resale certification process.  Additional information is available at www.SperlongaData.com.

SOURCE Sperlonga Data & Analytics