Bill aims to keep banks from owing extra foreclosure fees
by Daniel Vasquez
A Florida bill makes it clear that condominium and homeowners associations could be out of luck if they want banks and financial institutions to pay more in late fees and collections costs after foreclosure.
House Bill 319, co-sponsored by Reps. George R. Moraitis, R-Fort Lauderdale, and Fred Costello, R-Ormond Beach, limits what banks and first mortgagees owe to an association after foreclosure. The banks would only be responsible for past due assessments or a percentage of the original mortgage – not other costs, such as late fees and attorneys fees.
Supporters say the bill simply clarifies existing statutes.
“Our goal is to discourage unnecessary litigation and instead encourage the prompt resale of units and homes to new owners after foreclosure,” said Moraitis, who also sponsors another bill which compels banks to process foreclosures in a timely fashion or face deadlines set by a judge.
But critics claim HB 319 sticks communities with what could be hundreds or thousands of dollars in collections costs and other fees that accrue on a property during foreclosure. The more foreclosures faced by a community, the more the costs pile up.
Florida requires banks and other first mortgage holders that foreclose to pay a share of unpaid assessments. These “Safe Harbor” amounts are up to 12 months of unpaid assessments or 1 percent of the original mortgage, whichever is less. Some argue the law leaves room for boards to seek interest and late fees, along with attorney and collection costs.
It is common for owners behind in association payments to pay late fees, interest and attorney fees related to collecting payments. HB 319 makes it clear banks are not liable for similar fees.
Florida Bankers Association spokesman Anthony DiMarco says banks may be hesitant to make loans for condos if they have to face escalating extra fees. “When people stop paying association fees, they stop paying mortgages. So we are losing money here too.”
“Associations should be entitled to be reimbursed by banks for the reasonable time and fees that it takes to collect unpaid assessments,” said Robert Giacin, a public accountant and secretary/treasurer for the Boulevard Landmark Condominium Association in Hollywood, which runs a 37-unit community.
Giacin said Boulevard Landmark recently faced more than $3,000 in attorney fees after filing for foreclosure against an owner of several units behind in payments.
Mauricio Giraldo, a secretary for the Fountainebleau Gardens Condominium Association in Miami, said his community’s budget has been short $150,000 the past two years due to non-paying owners. The board cut back on security, landscaping and pest control services to make up the difference.
“We need help collecting this debt,” he said. “That’s why we turn to attorneys and debt collectors.”
Aaron Gordon, of LM Funding, which manages receivables for condo associations and collects assessments, said HB 319 limits the ability of associations to recover various fees that come with foreclosures. “Would the Legislature rather have associations and owners paying the burden here?”
HB 319 proponents say the existing ambiguity in the law leads associations to seek more money from banks beyond safe harbor limits.