Escrow Services for Homeowner Associations
HOA management companies provide escrow related services when homeowners in community associations either sell or refinance their property. In either case, an escrow company and real estate lender are generally involved in the transaction.
In addition to providing copies of the association’s governing documents, insurance coverages, budget, and all financial data and reports, the lender will always request that the management company answer a series of questions included in a lender’s questionnaire. These questions often involve legal matters.
The lender is seeking written answers to questions that will allow it to decide whether or not to make a loan to the prospective borrower to be secured by a unit or lot within the subject homeowner association. The lender is relying on the completeness and accuracy of the representations in the lender’s questionnaire to make their lending decision. This places a significant duty on the management company, acting an agent for the association, to make complete and accurate representations.
If the representations provided by the management company to the lender are incomplete or inaccurate and the lender has relied on misleading information, a significant liability is created. If the borrower defaults on the loan, or the lender is unable to sell the loan in the secondary mortgage market, the lender faces a loss.
In addition to the above, management companies must provide an accurate demand letter to the escrow company whenever a sale escrow has been established. This function assures the homeowners association that it will be paid what is owed including any assessments, special assessments, late fees, collection costs, and interest.
Our firm takes its responsibility seriously assuring our HOA clients that we will perform all escrow related services accurately and timely. Consequently, all requests must be in writing and all responses will be provided in writing.
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