SC homeowners have fallen victim to companies exploiting HOA foreclosure loophole

By Jessica Holdman 

Jan 3, 2020 

COLUMBIA — His family didn’t know it at the time, but in 2013 John Wynne was suffering from the early stages of dementia. He had always been the one who paid the bills, but he started to miss a payment here and there, his wife, Kay Wynne, said.  One of those bills was for their homeowners association.

The Wynnes said they paid Caroline Springs Homeowners’ Association $1,200 and thought they were caught up. Then a notice showed up posted on their door saying their home had been foreclosed on and sold at auction.  “Everything we have really is in our home,” Kay Wynne said. They were panicked.

A company called State Street Holdings bought their home, worth $165,000, for about $3,100 in December 2014. State Street took ownership of the home, but not the mortgage.  The Wynnes hired an attorney to fight their case in 2015 and the judge overturned the sale, but they learned others in South Carolina had lost their homes for failing to pay HOA fees.

South Carolina does not require including mortgage companies in lawsuits when homeowners associations foreclose over unpaid fees. Most states allow for HOA foreclosures, a process which takes 9 months to a year on average. South Carolina does not, but have some statute governing mortgage foreclosures said Dawn Bauman of the Community Association Institute. This leaves it to the courts’ discretion.

State Street is among a few real estate companies that have taken advantage of this loophole to turn a quick profit over the past decade, Brian Boger, a Columbia attorney who specializes in fighting HOA foreclosures, said.  The buyers of HOA foreclosed homes can make money off their bargain auction purchases by renting the home — either to new tenants or to the existing homeowners — or selling the houses back to the original homeowners for thousands more than the auction price.

These HOA foreclosures happen without the knowledge of the banks, since auction buyers don’t take over the mortgage, said Boger, who has represented a number of homeowners in these cases, including the Wynnes. This leaves now-former homeowners with a tough choice: continue paying for a house they no longer own or stop paying the mortgage and risk having their credit destroyed.

“I get the sense from owners that perhaps they do not fully understand HOA workings and ability to foreclose after they purchase their home,” said Lexington County Master-in-Equity James Spence. “Perhaps greater education in this area would be helpful.”

Legislation has been introduced in the Statehouse for this coming session that would prevent foreclosures by HOAs on homes that are primary residences. And a recent state Supreme Court ruling also could slow the practice by asking judges to consider the amount of equity in a home when determining the fairness of an auction sale price.

“People are losing their homes over less than $1,000,” Boger said.

In the case that reached the state’s high court, Devery and Tina Hale’s $128,000 home of more than 20 years in Irmo was sold for $3,000 at auction over what started as $250 in unpaid HOA fees.  Read more:https://www.postandcourier.com/business/sc-homeowners-have-fallen-victim-to-companies-exploiting-hoa-foreclosure/article_becc8984-227b-11ea-acd7-7ba9ed8c5697.html