Condo Boards Take on Lenders

Attorneys for condo boards claim some banks are intentionally slowing the foreclosure process to keep from forking out condo dues. In Florida, lenders are on the hook for as much as six months of late condo dues once they take title.

"It's become common practice to delay foreclosure," said Eric Glazer, a condo-association lawyer in Hallandale Beach, which is between Fort Lauderdale and Miami. "Banks are forcing the associations to take them the distance."

Last year, a unit in Miami Beach's Bath Club held by Wells Fargo & Co. racked up $32,000 in unpaid condo dues. The board attached a lien on a unit and filed to foreclose in December 2007. The unit sold in July at a foreclosure auction for $438,000; the condo association took its $32,000 and gave the balance to Wells Fargo.

The condo board that governs the Grand Condominium in downtown Miami has taken back 20 units in the 810-unit luxury development and collects a total of $25,000 a month in rent. The banks that hold the defaulted mortgages will eventually file to foreclose on the units. But meantime, the condo association uses the money to pay for building services. "I've had some units for over 16 months and I haven't heard one word from the bank," says Brendon Grubb, the general manager of the building.

With empty pockets, more condo associations are forced to raise homeowner dues. "We call it the downward spiral. How many of those owners are actually going to be able to pay an additional assessment?" says Kristy Phillips, a condo-association attorney in Hallandale Beach. "They're picking up the pieces for the banks." -Wall Street Journal, 6/18/09

How much simpler it would be to drop the interest rates on loans? What are the banks going to do when the next wave of foreclosures hit in the fall when the Alt-A's reset?