Expedited Foreclosures for Community Associations

 Will the name hold true after 2013?

As is the case in any collection matter, time is money; the faster the matter reaches resolution, the smaller the cost for the association and the member. With the new expedited foreclosure process borne out of the legislative session concluded in 2011, I envisioned a legal remedy that worked well for both sides. Members in arrears were given the protection of judicial review to the foreclosure process and community associations were given protections in efficiency and predictability. With plenty of time to practically apply those expedited foreclosure laws, I certainly gained some insights on how it works, the efficiency and cost of the process, and how the members in arrears and even the courts feel about the expedited foreclosure process.

Perspective on 2011 Impacts

Here’s a perspective on what our firm found as a matter of practical experience with clients since these laws were passed. 

What the application of the 2011 foreclosure laws has shown us is that the cases filed require more work up front but actually settle sooner in the process. The end result is that we find that our clients are spending less money in the long run through the utilization of the expedited foreclosure process..  In our practice, most applications for expedited foreclosure went from filing to order or settlement in less than 6 months. Given that the 2011 foreclosure laws are specific about aspects like service and default orders, we experienced a reduced incidence of the delays that are the norm in judicial foreclosure cases. These delays regularly push judicial foreclosure cases beyond 12 months.

Less than 2% of the applications we filed went all the way to the final hearing. While we had responses to the applications filed in an estimated 20% of proceedings, most respondents did so with the goal of working toward payment arrangements and filed a response, not to challenge the proceeding but to avoid default.

2013 and Beyond: Will the Process Continue to Be “Expedited”?

The 2013 changes to the foreclosure laws made additions affecting service of citation, court-ordered mediation, and forms promulgated by the Texas Supreme Court. Excepting the forms, the newest additions to the foreclosure laws may add time to the process which typically results in an inherent cost increase. Only time will tell whether the newest legislation affecting foreclosures will positively or negatively affect a system that has proven efficient and less expensive for community associations and its members.

Court-Ordered Mediation.   One new addition to the foreclosure laws provides the potential that a court can order the parties to mediate. The court may only order mediation under certain circumstances and a hearing is required as a component of ordering mediation. With a hearing about mediation and an actual mediation being part of the foreclosure process, it will certainly add time and expense to the expedited foreclosure process. The parties will share the costs of the mediator and a court will appoint a mediator if the parties cannot agree on one. While courts may not order mediation in all proceedings, for those in which they do order mediation, I expect those proceedings to last longer and cost more.

In conclusion, community associations that have not yet tested the expedited foreclosure process should consider the option if permitted by the dedicatory instruments. Given the efficiency and reduced cost when compared to the traditional judicial foreclosure process, the expedited approach should work toward improvement in the rate of collection for the association. 

The guest blogger for this post is Brady Ortego,  an attorney specializing in HOA law affiliated with Roberts, Markel in Houston, Texas.