Lenders' Reluctance to Foreclose is Crippling Community Associations
The Contra Costa Times, May 25, 2010: “Tens of thousands of homes in the East Bay are in foreclosure or are owned by banks. Some sit empty; a few are boarded up. Beyond the squatters and over-grown yards blighting neighborhoods, the glut of bank-owned homes means years of decline in the property taxes on which cities, schools and the state of California depend.”
Sound familiar? Of course it does, because the same economic forces are wreaking havoc with the budgets of community associations. The article continues:
“Foreclosed houses do not obtain lower property tax assessments until banks sell them. So tax revenue will keep falling until banks sell all the houses they end up with, creating a long-term lower tax base.” Basically this means that no one will know the full extent of this economic crisis until all of those foreclosed homes are re-assessed at dramatically lower values resulting in dramatically lower property taxes being paid over a long term.
But there is another result as well. Property taxes upon which local governments are dependent may not be re-assessed until the banks sell the properties, but homes in community associations that are in foreclosure for non-payment of the monthly mortgage most likely are also delinquent in their homeowner assessments. Banks don’t start paying these assessments until they actually complete foreclosure and obtain title.
The article states: “In the East Bay, banks own more than 10,000 homes, only a fraction of which are listed for sale. Another 20,000 are in foreclosure headed toward bank ownership.” But “headed toward bank ownership” is not bank ownership, and until the foreclosure is completed, the banks pay nothing toward the costs of maintaining the home which community associations must continue to pay. A healthy fraction of those 20,000 homes are in community associations and while the bank foreclosure process slowly continues, no assessments are being paid.
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