5/09/2016

Starting in 2016, Delinquent HOA Fees May Be A Part of Your Credit Score

Consumers' financial obligations for mortgages, auto payments and credit card payments have long been part of their credit profile. However, HOA dues payments have not. Although non-payment of HOA dues, in California, can eventually even trigger foreclosure by the Board of Directors, these payments have not been in included in credit reporting agencies. Now, Sperlonga, a credit data aggregator, is the first company to provide HOA payment and account status data to Equifax, which is one of the three major credit-reporting agencies. "A full rollout of the new HOA reporting to Equifax will go live in October 2016. And property owners who do pay on time will see a similar reflection on their credit scores.

According to the Community Association Institute, homeowner associations and property management companies collect approximately $70 billion in HOA payments each year through at least 333,000 community associations." Owners with a history of delinquent payments and/or non-payment can cause a great deal of financial problems for an association, especially smaller associations fewer than 10 units where there is a smaller risk pool. An HOA's operating budget and reserve funds may not be able to keep up with needed maintenance and infrastructure replacements without timely payments by all members, and those associations with more available funds will be stuck with fees and costs of pursuing delinquent owners, an eventual cost to all owners.

If you're contemplating buying a condominium or other property within a homeowner association, you are also agreeing to pay for your share of the common area upkeep, including insurance and maintenance costs. This is one of the reasons why your lender must order certain documents from the association during escrow to make sure you are well qualified to cover the fees and costs, as well as including that information in your upfront loan qualifying process. For people who may have reasons for temporarily falling behind in payments, a board may well be negotiable in setting up a payment plan--it would pay to approach the Board or your property manager for a discussion before becoming a delinquent owner.

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