by Tanta on 4/09/2007 02:45:00 PM
Monday, April 09, 2007
From the Washington Post: Condos Feel the Mortgage Crunch:
In a sign that the turmoil in the subprime mortgage industry is affecting entire communities and not just individual homeowners, condominium association officers, property managers and real estate lawyers throughout the region say they are noticing more delinquencies in monthly fees.
"If someone is not paying their mortgage, they're not paying their condo fee, and the condos need money to pay bills," said Jeffrey van Grack, a community association lawyer with Lerch, Early & Brewer in Bethesda.
About one in six Americans live in a community run by a condo or homeowners association. Fees pay for such services as water, garbage removal, cleaning and repairs. . . .
Delinquencies are also increasing on investor-owned units, lawyers and property managers said. At the height of the real estate boom, investors bought properties with the intention of selling for a quick profit. When the market turned, they couldn't sell. Now, they are renting the units out, sometimes for less than the monthly mortgage. To make up for the shortfall, some choose not to pay condo fees.
"We're starting to see delinquencies where they're not owner-occupied. It's not just a matter of a subprime borrower," said Thomas Schild of Thomas Schild Law Group in Rockville, which represents many community associations. "They were counting on increased equity. That equity is not happening."
I will observe that, on the whole, lenders and servicers do not like to escrow (impound) for condo and HOA fees—it’s pretty “inefficient” when you’re dealing with hundreds or thousands of little associations with big assessments or big associations with little assessments. By comparison, taxes and homeowner’s insurance are easy.
I will also observe that the article mentions a condo that needs, but apparently can’t afford, maintenance on its elevator. Liability insurance for a building with an elevator is kinda pricey sometimes. Even when the elevator is well-maintained. Were I the mortgage-holder on a unit in a project too strapped to fix its elevator, I’d probably have a hard time sleeping at night.
Posted by Tanta on 4/09/2007 02:45:00 PM