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Will Small Associations Continue to Subsidize BIG Banks? 

image2During the sub-prime mortgage fiasco, a few of the nation’s biggest banks made bad loans to Connecticut condo owners AND now they are asking their neighbors – YOU – to make up the lost profits.  They’re asking courts to declare that homeowners’ associations are responsible for maintaining the units during the foreclosure process and afterward even if no common charges on that unit are paid by anyone ever again… and the courts are agreeing.  So who makes up the difference?  Everyone else in the community.

The banks have hired a national law firm which describes itself as “one of America’s largest law firms” to come to Connecticut with a novel strategy.  First, they start a foreclosure lawsuit against the unit in default and pay the association a few months’ worth of the unpaid common charges.  Then they ask the court to order that the small six-month lien which state law gives associations over mortgages applies only once during the lawsuit or even the lifetime of the mortgage.  Then the banks just sit back and let the foreclosure sit uncompleted, often for many years.  They have no reason to take over the unit since they know the association has to maintain and insure the bank’s collateral out of its communal budget funded by the other unit owners.   

Even if the defaulting unit owner eventually works out a deal with the bank to reinstate the mortgage, some of these banks have asserted that the mortgage continues to trump the common charges going forward if the owner doesn’t pay them.  The association could start its own foreclosure, but under the banks’ theory, it would have to take title to the unit and also repay the mortgage on it, which would often cost more than the unit is worth. 

The cumulative effect of this new legal strategy on the communities of this state will be devastating.  Smaller proportions of owners will have to pay larger shares of the cost to cover the increasing number of units in default for years at a time, causing financial burden and deteriorating property values which can lead to even more foreclosures.  And through it all, the banks will enjoy free services to preserve their collateral at the expense of everyone else in the community who had nothing to do with their neighbor’s mortgage.  


Together we can stand up to these giant banks and restore the decades-old understanding of the association’s six-month priority lien under Connecticut law: that it exists before each foreclosure to discourage them from being prolonged and subsidized by other owners.  We need to take action now. 

Here’s what you can do: 

    1. Call and write your state legislators to urge them to support HB 6662 with an amendment to allow for EACH ACTION to be subject to the six-month priority lien. Their contact information is available at: www.cga.ct.gov/asp/menu/CGAFindLeg.asp.
    2. Join us at the public hearing to speak in favor of this crucial legislation on March 25, 2013. 
    3. Contribute to the CAI-CT’s legal defense fund to help coordinate legislative efforts and fund litigation to fight for our communities. Your association can support CAI and donate just $50 or more to help us defend against the big banks’ assault on our rights.  http://www.caict.org/LAC_Donation.html
    4. Provide information about your association and any issues you have had with bank foreclosures.  http://www.surveymonkey.com/s/CYT3KG8

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The Community Associations Institute - Connecticut (CAI-CT) is the state chapter of a national nonprofit organization which serves to promote the best practices of community association operations for the one in six Americans who live in condominiums, homeowners associations, or co-ops. We seek to foster vibrant, competent, and harmonious community associations within our state. We do this by providing educational programs, publications, and networking opportunities for both the communities and the businesses that serve them.  For more information, go to www.caict.org.