Mortgages

Las Vegas Foreclosure Mess Ends in Bitter Duel

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No! We’re the Good Guys!

In addition to calling the other side names, both investors and debt collectors argue that they represent the best interests of regular homeowners. Without debt collectors HOA’s would have no mechanism for collecting unpaid dues, the collectors say. That deprives associations of money they desperately need to maintain their subdivisions, attract new homeowners, and hopefully escape the housing recession.

“These speculators want to come in here and make huge profits, and forget what happens in the neighborhood. They don’t care,” says Stone, of Nevada Association Service. “If they’re unwilling to pay their fair share, everybody else in the community has to pay more.”

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Local homeowner advocates agree with collection agencies that investors should pay the fees. The HOA’s must be paid. And if the dues aren’t paid by investors, then existing neighbors who have done nothing wrong and stayed current on their mortgage payments are left to subsidize the investors by shouldering higher dues.

“In the end, the investors just have to pay,” says Burks.

Besides, Burks and the collectors argue, it’s not as if investors don’t now about the collection fees before they buy a house. The HOAs’ liens are disclosed during the purchase process.

“They’re acting like this is all a surprise, as if we’re trying to scam them,” says RMI’s Parker. “There’s no surprise here. These speculators know exactly what liens exist on every house before they buy it.”

Meanwhile, investors insist that by finding new owners for foreclosed houses, they play an important role in stabilizing HOA finances and catalyzing the recovery of the Las Vegas housing market. Charging them fees to collect debts they didn’t create isn’t just illegal, they argue—it’s counterproductive.

“They want to charge these fees not because it’s right, but because it’s convenient. Because they think the investors have the money to pay,” Adams says.  

A Huge Mess

The argument began last fall with a lawsuit by Las Vegas-based attorney Puoy Premsrirut against a debt collection company for allegedly trying to collect illegal fees. Class-action lawsuits against multiple collection companies followed.

Investors asked the Financial Institutions Division to strike down the fees. Instead, the division set a cap of $1,950 for fees related to unpaid HOA dues. The cap satisfied some collection agents, including Stone. But it enraged others, who sued the division over the cap, upping the ante in the legal battle.

Meanwhile, the collectors filed a lawsuit against Premsrirut and other investors, alleging that their onslaught of lawsuits constituted an abuse of the legal system.

“All of their lawsuits have been struck own, and every time they lose they just file another one somewhere else,” Stone says. “It’s utterly ridiculous. They need to stop.”

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The allegation turns the investors nearly apoplectic.

“When is it an abuse of process to demand due process?” Premsrirut says.

The legal battles are likely to wind up before the Nevada Supreme Court, both sides agree. Meanwhile, investors, collection companies and HOA’s all are lobbying state legislators for bills that would alternatively revoke the cap, explicitly include collection fees in super-priority liens, or ban the fees altogether.

“Oh yes, it’s definitely complicated,” Burks says. “There’s a lot of money at stake, not to mention the future of these neighborhoods.”

Image by KWDesigns, via Flickr

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