Ok, this article from WSJ should not surprise any HREU Students. We have been preparing you for well over a year that the second half of 2009 would see a dramatic increase in foreclosures…..

Here’s another sign that California’s foreclosures could jump in 2009: Delinquencies on dues owed to homeowner associations have risen sharply.

The homeowner association delinquency rate can serve as a leading indicator of sorts because homeowners usually stop paying dues before they stop paying their mortgage. The 90-day delinquency rate on dues for the 260 homeowner associations in California managed by Merit Property Management jumped to 5.3% in March from 2.8% last June. Delinquencies first spiked to 2.6% in December 2007 from 0.8% in March 2007.

The Journal looked at how banks were beginning to ramp up foreclosures after holding off for several months. Pre-foreclosure notices in California spiked in March after a state law had suppressed foreclosures at the beginning of the year.

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Delinquency rates have risen to as high as 15% in some Merit communities, says Andrew Schlegel, the company’s financial vice president. The rising number of HOA delinquencies and the boost in pre-foreclosure notices could be a harbinger of things to come. “There’s reason to believe in California there may be a second wave of foreclosures,” he says.

Rising delinquencies for homeowners associations, which function like municipalities, are forcing cutbacks on services like landscaping, security and community services. About 60 million Americans live in one of 300,000 community associations. Potential homebuyers can learn about delinquency rates for their HOA before buying in the neighborhood, and lenders usually ask the management company of a community association to provide delinquency rates for that HOA when they’re writing a new mortgage.

HOA managers have raised concerns in recent weeks that the Obama administration’s efforts to modify loans could overlook unpaid liens that have been attached to homes. If homeowners with modified loans don’t resolve their unpaid HOA dues, the homeowner association could still pursue foreclosure.

Readers, how are your HOAs coping with the uptick in delinquencies? If there are any that are taking particularly controversial or unusual steps..let us know.

Source: WSJ.com

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