Homeowner's Association and a Commercial Banker Chime in on Riverwalk Condos; How Debt Collectors Can Make You Miserable, Years later

In response to Redmond, WA Condo Association Votes to Mass Default I received a couple of emails worth sharing. One is from the vice president of the Riverwalk Homeowner's Association, the other from my California Commercial Banking friend.

From Bill Landon, Riverwalk Association

Hello Mish,

My name is Bill Landon and I am the Vice President of the Riverwalk HOA in Redmond WA. On behalf of the Association's Board of Directors, I would like to address the primary subject of your recent article "Redmond, WA Condo Association Votes to Mass Default."

The headline is incorrect, and the information (believed to have been provided from the friend of an owner) is not entirely accurate. Neither the Board nor the homeowners have voted to "Mass Default." There has been NO vote to terminate the condominium at this time.

The Board called an official membership meeting last month to discuss the current situation we find ourselves in due to the condition the developer has left the Association and our property.

During that meeting, we had our legal experts go over a whole host of options for the owners to consider in regards to our situation. We also had a report of findings from our architect that detailed a rough outline as to the condition and repair plan of our buildings.

Two weeks ago, there was a non-official meeting of a group of concerned homeowners who got together to brainstorm ideas for addressing our situation. As requested for that that meeting, I arranged for the Association's architect to answer technical questions.

The Board's take on both meetings is that owners want, and are coming to, a better understanding of the situation faced by the Association and themselves with respect to their investment. As a result, several homeowners have formed action committees to look into other "outside the box" options such as contacting the mayor, contacting their mortgage holder as a group, looking into government programs, etc.

The upshot is, this Association's Board, along with its legal team, is still formulating a game plan and way forward. There will be additional meetings before we even consider voting on anything. Meanwhile, your blog readers should know that the headline is flatly wrong. This community's members have not voted to walk away from their Units or this Condominium.

Thank you for your time,

Bill Landon

My Response to Mr. Landon

Thanks Bill

It's important to get the facts straight. I am happy to print your email response.

However, my personal opinion still stands. Writing the mayor, seeking help from government programs, etc, is an enormous waste of time, offering nothing but false hope.

Moreover, If mortgages are spread out among lenders, contacting lenders is highly likely to be futile as well. Even if the majority of loans are with a single bank, If I was a bank I would not do a thing. I am not a bank, so your results may vary.

My opinion still stands, that everyone in the building who is underwater should immediately consult an attorney familiar with real estate law in the state of Washington.

Clearly, anyone who eventually decides to walk away, is far better doing it now rather than a year from now, wasting 12 months of mortgage payments and 12 homeowners association dues in the meantime.

For many if not most, and on advice of their attorney, I suspect walking away will be the best option. Once again that is obviously an opinion, and best resolved with legal representation on a case by case basis.

I understand the bind you are in. I wish you had better options. But it's time to be honest. You simply have to realize that those "outside the box" solutions are an enormous long shot at best, perhaps akin to winning the lottery.

In the meantime here is what you are hoping for

• An engineers' report that says the problem can be fixed.
• The engineers' report is correct and does not result in people throwing more money down a bottomless hole.
• That homeowners do not walk-away anyway, dumping excessive costs on those who stay.
• That the building appreciates in value and people can break even.
• That even if owners can break even, that it makes economic sense to stay.

That combination is another lottery in and of itself.

Mish

I exchanged several amicable letters with Bill Landon. In one quick comment Bill said

Thank you for updating the story. I agree, individuals need their own legal advice. We have a long road ahead of us.

Thanks,

Bill

Debt Collectors Can Make You Miserable, Years later

The Washington Post has a good article outlining the need to seek professional legal advice. Please consider Debt collectors can come calling years after a mortgage default

Homeowners defaulting on mortgages today may be surprised to learn years from now that they still owe thousands of dollars -- and that a collection agency is coming after them to get it.

That's because lenders have been quietly selling second mortgages and home-equity lines left unpaid after foreclosures and short sales. The buyers: collection agencies, which in some states have years to make a claim.

If they win court judgments, these collectors could have years to pursue borrowers with repayment plans, and even to garnish their wages, said Scott CoBen, a Sacramento bankruptcy attorney.

"The only relief a consumer will have is entering into a debt-negotiating plan or filing for bankruptcy," said Sylvia Alayon, a vice president with the Consumer Mortgage Audit Center. The firm provides mortgage analysis to lenders, advocacy groups and attorneys.

Seek Legal Advice Before Walking Away

Here is my caution once again...

Before Walking Away Consult An Attorney. There are a lot of potential snags to consider if you go it alone.

California Commercial Banker Chimes In

Here is an email from my California commercial banker friend.

Hey Mish

Loved the blog about the Redmond condo complex. I have several clients who buy distressed real estate, and have performed condo conversions from apartments. You’re correct on the valuation model being virtually nothing. Should everyone walk away, and the loans are dispersed amongst many banks, it would be near impossible to sell units one at a time, while the entire complex needs repairs.

The only real value in this complex would be to a large real estate investor with very deep pockets in the form of cash and very long investment time lines. It would take years to get the potential banks of those foreclosed condos together to sell the building in bulk to one investor, which is the only real way to return this real estate asset to the real world.

I have a client that’s worth $150 million, and they purchased, 10 years ago, a multifamily project with over 600 units for just $7K a unit. That’s how cheap this kind of distressed situation can become, and this is in CA were real estate prices are very high. It’s taken them 10 years to get roughly 80% renovated and leased out. They have invested well over $20 million in improvements, on top of the $4-5 million purchase price.

The property's value is only what we term in banking/real estate investing as the bulk value, and given the circumstance, that’s well below retail values or what’s owed.

California Banker

This is a tough choice for many at Riverwalk. Good luck to you.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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