By Brian P. McLean, Leahy.ps
According to Aubrey Cohen of the Seattle P.I. and her source, First American Core Logic (http://blog.seattlepi.com/realestatenews/archives/175092):
In June [2009], 3.9 percent of Seattle-area mortgages were at least 90 days delinquent and 1.2 percent were in the process of foreclosure — a big jump from the rates of 1.4 percent delinquent and 0.5 percent in foreclosure a year earlier, according to a new report.
What does this mean for condominium and homeowner associations in Washington? Well, if there’s a 3.9 percent default rate on mortgagees, you can assume that there’s a higher rate of default for association assessments. Something I’m certainly seeing. Owners with tightening budgets are making choices, and whether the choice is strategic mortgage default (an owner with sufficient financial resources to pay a mortgage nonetheless defaults because of the perception that walking away from negative equity is a rational choice) or default by necessity (i.e., lack of money to pay all the bills), the result is the same — most owners will default on their association assessments before their mortgage.
But does this make sense? Probably not, because the Association can pursue the homeowner personally for unpaid dues — a right most mortgagees give up when they nonjudicially foreclose on a home. So — the owner who walks away from a mortgage and loses his or her home still faces the prospect of a claim for unpaid association assessments. And in either case damage to credit.
It may take months or even years to sort out this economic upheaval. In the meantime, Associations should continue to take rational steps and shore up defenses against the eroding mortgage landscape while educating Washington owners about rational choices during a period of shrinking incomes, prices, and resources.
