In another article New Angle on an Old Problem: Advance Funding of Delinquent Assessments, we outlined tactics that community associations often employ to collect delinquent assessment fees. One of these tactics is funding delinquent assessment fees in advance.
The Advance Funding of Delinquent Assessments System
A community association (commonly called a homeowner association, or HOA) uses an advance funding system by selling past due balances or, in some instances, its right to collect receivable balances – usually those that are at least 60 days past due – to finance companies that take title to the statutory balances. These purchased receivables can be taken with or without recourse.
From this point forward, the finance company is responsible for collecting past due amounts from the bank or mortgage holder. The association is not liable for any legal collection fees, court costs, or administrative expenses. Once the finance company acquires a past due account, the association will no longer allocate resources to managing the account.
The most efficient finance companies work to obtain the entire past due amount on the community association’s behalf. Furthermore, if these finance companies pay a year’s worth of past due assessment fees up front and collect other fees from the bank – through their attorneys—then they might pay all of the assessment fees back to the association.
CRI Can Help Your Community Association Implement the Advance Funding System
Is this solution sounds too good to be true? We thought so at first. However, we now know that the advance funding system is an effective way for community associations to collect past due balances. If you still have questions, contact CRI’s community association team. We understand your industry and proactively share best practices to improve your organization’s balance collection procedures.