Bank subsidiary suing over back fees on foreclosures

By Steve Green

Friday, Feb. 4, 2011 | 2:05 a.m.

A Bank of America subsidiary is suing scores of Southern Nevada homeowner associations, their trustees and collection agencies in yet another dispute over foreclosures, HOA assessments and collection fees.

BAC Home Loans Servicing LP filed suit Jan. 31 in U.S. District Court in Las Vegas, charging the HOAs and their trustees are wrongly demanding BAC pay fees and collection costs it’s not obligated to pay.

BAC’s lawsuit says liens HOAs can file against properties for unpaid HOA assessments are limited under Nevada law to nine months of assessments.

“BAC services hundreds of residential loans secured by properties that are subject to these homeowners’ association liens. To maintain clear and marketable title to these properties, BAC has tendered payments to the trustees of many homeowners’ associations that, if accepted, would fully satisfy their super-priority liens. But the trustees of many homeowners associations are rejecting these payments based on erroneous interpretations” of the law as they insist on accepting only payments that include the disputed collection costs, the lawsuit said.

“The trustees are also demanding BAC pay fees and costs excluded from the super-priority lien as a condition to accepting payment of the super-priority amount. BAC therefore seeks a declaration confirming (a) its right to tender payment of super-priority liens and (b) the amount entitled to superpriority status,” the lawsuit said.

An example cited in the lawsuit involved the Southern Highlands Community Association, to which BAC says it tendered payments for assessments on five homes through Southern Highlands’ trustee, only to have the trustee reject the payments and proceed with foreclosures against the properties over their debts to the HOA.

The trustee contended “the payments were not for the full lien amount because none of the five payments included Southern Highlands’ attorney’s fees or ‘the reasonable costs of collection,’” BAC said in its lawsuit.

The suit is similar to litigation against Nevada Association Services and other collection agencies for HOAs in which homeowners and investors in foreclosed properties charge they’ve been hit with excessive fees

Homeowner associations and their collection agencies have said they need to cover their collection and legal costs to keep HOAs afloat and their budgets balanced.

BAC also complained in its lawsuit that some associations won’t even deal with it as BAC tries to foreclose on homes.

“Many homeowners associations refuse to provide BAC payoff information and reject BAC’s tender in part because they wrongfully contend BAC ‘has no relationship [with it], and therefore no obligation to communicate with or negotiate with [BAC] under any circumstance unless and until [BAC] is the owner of the property,’” the lawsuit said.

“BAC is entitled to pay off that portion of an association’s lien that is senior to BAC’s first deed of trust, even if payment is tendered before BAC forecloses on the deed of trust. This right necessarily includes the right to obtain information related to the exercise of those rights, including the amount due,” the lawsuit said.

The defendants in the new BAC lawsuit — none of whom have answered the suit — are:

Alessi & Koenig LLC, Aliante Master Association, Allied Trustee Services Inc., Angius & Terry Collections LLC, Anthem Highlands Community Association, Assessment Management Group Inc., Asset Recovery Services Inc., Canyon Crest Association, Cortez Heights Homeowners Association, Elkhorn-Cimarron Estates Homeowners Association, Elkhorn Community Association, G.J.L. Inc. d/b/a Pro Forma Lien & Foreclosure, Heritage Square South Homeowners’ Association, Homeowner Association Services Inc. and K.G.D.O. Holding Company Inc. d/b/a Terra West Property Management.

Also, LJS&G Ltd. dba Leach Johnson Song & Gruchow, Las Brisas Homeowners Association, Mountain’s Edge Master Association, Mountain’s Edge Homeowners Association, Nevada Association Services, Phil Frink & Associates, RMI Management LLC d/b/a Red Rock Financial Services, Sierra Ranch Homeowners Association, Silver State Trustee Services LLC, Southern Highlands Community Association and Stonefield II Homeowners Association.

Similar to the investors' lawsuits, the BAC lawsuit specifically accused the HOAs and collection agencies of improperly trying to collect attorney's fees and collection costs from BAC.

The suit says: "Defendants have, among other things, (a) refused to accept BAC’s tender to pay the amounts secured by the superpriority lien and (b) improperly demanded payment of attorneys’ fees and collection costs even though these expenses are not afforded super-priority status by'' Nevada law.

But David Stone, president of Nevada Association Services Inc., said Friday: "This lawsuit is in no way familiar to the lawsuit brought by investors against hundreds of HOAs and their collection companies. The investors would like you to think it is, but it is not. This lawsuit seeks clarification (a declaratory order) from a court on the responsibility a lender has with respect to the nine-month super-priority lien obligation even before the lender forecloses. And because these demands are being made by this lender 'pre' foreclosure, there are no demands made upon this lender by the HOAs or collection agencies, contrary to the (Las Vegas Sun) article. This is not a 'collection fees' issue at all.''