A new servicing rule that forces mortgage servicers to pay certain fees when dealing with foreclosures on properties linked to Homeowners Associations (HOAs) took effect Jan. 1, the U.S. Department of Housing and Urban Development confirmed Thursday.
HUD said the rule passed last summer and was extended twice. It's now officially in effect and could result in financial penalties for servicers who don't deal with HOAs properly during foreclosure proceedings.
Sperlonga Data & Analytics, a national asset management firm, that has its own database containing two-thirds of the country's HOAs, released a report advising the industry on how to heed the guidelines.
Specifically, the rule says servicers and lenders have to name and serve the HOA during the foreclosure process, so HUD does not get stuck with unpaid HOA fees.
Once a foreclosure is finalized, the servicer is required to notify the HOA of the servicer's interest in the property and must pay any HOA-related fees and finances prior to the property's conveyance to HUD.
Once the property is in HUD's control, if the servicer followed the HOA guidelines, HUD will reimburse the servicer for the HOA fees covered between the date of the foreclosure to HUD's possession of the property, Sperlonga pointed out.
Click here to read the original rule.