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Bankrupt and Foreclosed Borrower Sues Lender for Incurring Homeowners Assn Fees

May 27, 2011

Our Moreno Valley foreclosure defense lawyers write a lot here about borrowers suing their mortgage servicers for dragging their feet on a loan workout decision. So we were interested to see a news item about a slightly different kind of lawsuit: a suit intended to force a lender to complete its foreclosure. According to the May 17 Nashville Tennesseean, that's what Sheryl Lynn Pigg has had to do after she lost nearly all of her money and property in the floods of 2010. She is in foreclosure and declared bankruptcy in September. Nevertheless, due to a provision in the 2005 changes to the bankruptcy laws, Pigg is still legally obligated to pay homeowners' association fees on the unit until Bank of America completes the foreclosure process.

Pigg had to be rescued by boat from the second story of her building in 2010, after floodwaters engulfed the first floor. When she filed for bankruptcy, she owed $97,500 on a unit worth $55,000, in part because of the flood damage. But despite her bankruptcy, she is still legally obligated to pay HOA fees of more than $150 a month because her bank has not completed the process. The chief bankruptcy judge for the Middle District of Tennessee, speaking generally, said banks prefer not to complete foreclosures because it makes them responsible for the HOA fees, which was not true before the 2005 changes. He also noted that banks don't like having the bad debt on their books. The article said borrowers nationwide are pursuing similar claims.

As West Covina consumer bankruptcy attorneys, we're sorry to say this sounds familiar. We work every day with borrowers in default or foreclosure, some of whom are pursuing bankruptcy, so we know all too well that the 2005 bankruptcy changes stick borrowers with the cost of HOA fees for as long as lenders care to sit on the foreclosure. The article quoted RealtyTrac statistics showing that average time to foreclosure has ballooned from 151 days in 2007 to 400 days this year. In fact, as the chief bankruptcy judge noted, banks also drag their feet to avoid counting the debt against their profits for investor purposes. This practice helps banks continue to make fat profits, but it unfairly harms borrowers who are already so far past their financial limits that they're in bankruptcy in the first place.

Howard Law PC helps borrowers fight back against lenders that violate their legal rights or treat them with gross negligence. As Cerritos foreclosure defense lawyers, we've spent the last several years representing borrowers who are victims of unfair or avoidable foreclosures, or illegal and unfair treatment by their loan servicers. Just as with HOA fees, the incentives for loan modifications are not in favor of consumers; loan servicers can make more money by allowing the loan to lapse into foreclosure. However, it's bad public relations to say this, so servicers claim paperwork is missing, attempt to foreclose illegally and find other reasons to stretch out the process. We fight back with lawsuits intended to enforce clients' legal rights and give them a fair chance at protecting their homes.

If you're sick of calling and calling your lender, only to be ignored or given conflicting messages, you should call Howard Law instead to discuss how we can help. For a free, confidential evaluation of your case, send us a message online or call 1-800-872-5925.