The Camino Del Sol home, left, and the Lago Drive townhouse are owned, at least for now, by the Rancho Murieta Association.
Two foreclosed homes in Murieta North -- a townhouse on Lago Drive with a view of Laguna Joaquin and a two-story single-family home on Camino Del Sol -- have something else in common. Both are owned by the Rancho Murieta Association and they're being rented to recoup unpaid homeowners association fees.
"If someone doesn't pay their HOA fees, the association is allowed to (pursue) what they call nonjudicial foreclosure," RMA General Manager Nick Arther explained in a phone interview Thursday.
Banks don't want to initiate foreclosure, Arther said. "They'll sit around for years and not foreclose on a property because they don't want to pay the HOA fees." If a bank has not foreclosed on a home in two years, the RMA exercises its right to foreclose on it through Allied Trustee Services Inc., a foreclosure company. "They will go in and exercise our right to foreclose on it in hopes that we will get the bank to move," Arther said. "It happens once in a while that they will. For instance, we had another property that we were in the process of exercising our right for nonjudicial foreclosure, and about halfway through that process we heard the bank was going to go ahead and foreclose on it so we backed off. ... That's what we want to happen because, when the bank forecloses on it, they have to start paying (dues) ... That's what we would prefer. But they are not motivated to do so."
If the bank doesn't step in and the RMA acquires the property through nonjudicial foreclosure, the house can't be sold "because it would be subject to the first loan and the first loan is way over what it's worth," Arther said. "So Allied Trust has said, fine, we'll exercise our nonjudicial foreclosure rights. Then the association can rent it, and they can use the rental income to pay all late fees, all back HOA fees, and all current fees. ... The bank still has a right to come foreclose on us."
Arther said the RMA doesn't pay any of the costs associated with the foreclosure process, since Allied gets the opportunity to go after the owner to pay the cost, but won't come after the RMA. The RMA has been doing business with the company for a long time, he said.
"Allied Trust is a huge company that handles a lot of nonjudicial foreclosures for homeowners associations all over the country and they've literally done thousands of these things. ... They do it automatically for us," Arther said.
So far there have been three foreclosures. Arther said the home on Camino Del Sol has been rented and is "working quite nicely for us," and the one on Lago Drive has a tenant lined up. Arther said the third foreclosure will not be rented because of the amount of repair the home needs.
Arther estimated the Lago Drive townhouse would have to rent for about a year and a half to repay the homeowner association fees owned to both RMA and Murieta Townhouses Inc. After the fees are paid, in theory, "the RMA is making a profit and all those funds will be put in an account and saved so that when the bank ultimately forecloses, if they say they would like any profits, money will be given to them," Arther said. "The chances of them asking for any profits are pretty remote. I don't think it's ever been done, but it could be. ..."
He characterized the foreclosure strategy as "a fairly new innovation because, four years ago when there was money in real estate, people didn't let their house get foreclosed on because they had equity."