HOAleader.com - Tip of the Week - July 22, 2011
Published: Sat, 07/09/11
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How One Condo Association Went from Near Collapse to Solvency in
Nine Months
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In less than a year, the Venetia Country Club, an association
in Largo, Fla., went from more than $350,000 in
delinquencies--and near-collapse--to having reserves in the bank.
In this week's tip, we hear how board member Scott Simms
helped turn it around with help from Tampa-based LM Funding.
"Venetia was days from having the whole complex's water
shut off and having no hurricane insurance," says Simms.
"I'd heard of LM Funding through a contact in the property
management business. By the time I contacted them,
we had a 55-60 percent delinquency rate to the tune of
around $350,000-$400,000."
Venetia's board started by giving LM Funding a fraction of
its delinquent units on which to pursue collections. "We didn't
give LM Funding every single unit that was behind," says Simms.
"We picked out about 20 units owned by investors who owed us
$10,000-$12,000 and who we knew had no intention of paying us."
How could LM Funding help? "We work with condo associations,
not HOAs, because the statutes in Florida for each are
different," explains Frank Silcox, CEO. "We help them with their
delinquent accounts by providing up-front cash in exchange for
assigning to us the late interest charges and fees that have
accrued on the accounts. We pay all legal costs and pursue
recovery of the delinquent accounts. When we get payoffs, we
retain the interest and fees, and the association gets the back
assessments. To date, we're averaging 92 percent recovery."
How does LM achieve those results? "What we do particularly well
is on bank foreclosures, instead of settling for the statutory
safe harbor amounts, we're recovering 100 percent," says Silcox.
He's referring to the Florida law that allows banks that have
foreclosed on condos to pay to the association the lesser of 12
months' delinquent assessments or 1 percent of the mortgage
amount. "We're averaging over 600 percent recovery on the
statutory minimum."
The difference between the statutory amount banks are required
to pay and the total amount owners may owe can be substantial.
"If you've got an owner who hasn't been paying the assessments
and the bank has stalled the foreclosure, there could be three
years of back assessments," says Silcox. "When banks foreclose,
they're obligated to settle up with the association. Often they'll
argue that they don't owe the entire, say, $30,000 in
delinquencies for a unit, but, say, $1,500, or 1 percent of
$150,000 mortgage. We'll challenge the banks on that."
To learn more about our turnaround case study, see our new
article: http://www.hoaleader.com/members/603.cfm
Best regards,
Matt Humphrey
President
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