The economic impact of the COVID-19 Pandemic raises serious concerns for potential future increases in community association delinquencies. One important indicator related to a future increase in delinquencies is the mortgage foreclosure rates (or as they are known in Arizona, Trustee’s Sales). A mortgage foreclosure occurs when a borrower fails to remit mortgage payments and lender institutes proceedings to foreclose on the underlying property. In many cases of mortgage foreclosure, community associations are left with unpaid assessments. According to an article from The Truth About Mortgage, of the reported mortgages currently in forbearance (which means that the lender has agreed to temporarily suspend mortgage payments) due to the Pandemic, only 9% have less than 10% equity in their properties; less than 1% are underwater; and, approximately 80% have at least 20% equity in their properties.
As such, unlike the previous housing crisis in 2008, many homeowners currently in forbearance will have options as a result of the equity in their properties (home equity loans, selling and/or refinancing and taking money out), which should reduce the number of foreclosures and limit the impact of the Pandemic on the housing market. FHA and VA loans will be the most at risk due to low down payments and lower credit requirements. As such, while the overall data supports a minimal impact on delinquencies related to foreclosures, communities with higher numbers of FHA and VA loans will likely be most impacted by assessment delinquencies moving forward.
If your community has delinquencies, timely collection action is of the utmost importance. We are currently offering one free credit snapshot, per community, for a delinquent owner. Please contact Mulcahy Law Firm, P.C. (602-241-1093 or firstname.lastname@example.org) for further assistance.