Reverse Mortgage Servicing Challenges with HOAs

3 min read · Written By: May Galan, Senior Vice President, Association Management

As a reverse mortgage servicer, one of the challenges faced is dealing with homeowner's associations (HOAs). HOAs are common across the country and can create unique challenges for reverse mortgage servicers. In this blog post, we'll explore some of the HOA-related issues we encounter and how we work to address them.

First, let's review what an HOA is and why it can be a challenge for reverse mortgage servicers. An HOA is a private organization that governs a community or subdivision. Members of the HOA are typically homeowners within the community, and they are responsible for maintaining common areas and enforcing community rules and regulations. HOAs can create challenges for reverse mortgage servicers because they may have different requirements and regulations in each state.

One common issue we encounter is related to HOA fees. Many HOAs require homeowners to pay monthly, quarterly or annual fees to cover the cost of maintaining common areas and providing services such as trash removal and landscaping. When a borrower takes out a reverse mortgage, the owner is responsible for paying these fees. However, if the borrower falls behind on their fees or the HOA changes its fee structure and the borrower can no longer meet the obligation, it can create complications for the servicer when a HUD claim is required. Failure to pay the HOA fees can create liens on the property that is subject to foreclosure if not satisfied.

Another challenge encountered is that a property may have more than one HOA and roughly 20% are self-managed. Sometimes it takes a lot of work to find these HOAs as some states have fewer requirements for publishing contact information. Precedent Management has over 75,000 HOAs in their database and continually updates and adds to their databases their contact information and their corresponding association management companies’ information.

We may also encounter issues related to communication with the HOA. Because HOAs are private organizations, they may not always be responsive to requests from the lender or servicer. This can create delays or complications when it comes to resolving issues related to fees, rules, or property maintenance.

So how do we work to address these challenges? First and foremost, we strive to maintain open communication with the HOA and the management company. We work to establish relationships with HOA board members and property managers to ensure that we are aware of any changes to fees or rules that may affect the borrower's reverse mortgage. We confirm the HOA fees are up to date and, if not, with the approval of the client, we work to bring them current per statute compliance so that the mortgage servicers can proceed with HUD requirements to file a claim.

Finally, we work to ensure that our systems and processes are set up to handle HOA-related issues efficiently and effectively. We have dedicated teams responsible for managing HOA fees and resolving issues related to communication and compliance.

In conclusion, dealing with HOAs can create unique challenges for reverse mortgage servicers. However, by maintaining open communication and establishing effective systems and processes, we can work to address these challenges and ensure that the mortgage servicers are protected and can comply with HUD requirements when filing a claim.

Precedent Management supports their clients with highly specialized resources to help successfully process HECM claims for conveyance to HUD. Property taxes, violations, Homeowner and Condo Association lien monitoring and bring currents require high touch services that save mortgage servicers thousands of dollars by outsourcing to Precedent Management to successfully process their conveyance claims. We have monitored over 200,000 HECM properties for mortgage servicers, sub servicers and government sponsored enterprises.

The high touch services provided by Precedent Management is unparallel to any other outsourcing methods used by mortgage servicers.

To learn more about how Precedent Management can help with your servicing needs, please get in touch with info@precedentmgmt.com to schedule a discovery call.