HOA and COA’s may finally see some relief in the Safe Harbor nightmare that they currently are faced with.  The Florida Statutes, as they are currently written, require Banks, who are the foreclosing first mortgagee, to pay an Association the lessor of 12 months of assessments prior to the issuance of the certificate of title in their name or 1% of the principal mortgage amount.  It is not that cut and dry, but in most cases that is all the Association is entitled to recover when the bank is the highest bidder.  If you are an Association, it is imperative that you have an Attorney review the case to make sure that you correctly identify whether safe harbor applies and that the entity who took title is in fact a first mortgagee as contemplated by the Florida Statutes.

Because of a recent ruling in the Circuit Court case Federal National Mortgage Association, Inc. vs. Park Place at Pompano Condominium Association, Inc., 17th Judicial Circuit of Broward County, Case No. 13-13980 CACE (04), May 28, 2014, Sandra Perlman, Judge, we may see that the tides are changing more in favor of the Associations.  This case is not an appellate case but could be persuasive in your jurisdiction.  In this Circuit Court case Judge Perlman ruled that the Plaintiff, Federal National Mortgage was not entitled to safe harbor because in the underlying mortgage foreclosure action they were not the foreclosing entity but rather were assigned the bid after the foreclosure action was completed.  Federal National Mortgage claimed they were entitled to safe harbor because they were the owner of the note and therefore a first mortgagee.  The servicer of the mortgage, BAC Home Loans was the entity that brought forth the foreclosure action and therefore Judge Perlman ruled BAC Home Loans was the only entity entitled to safe harbor not Federal National Mortgage.

When a first mortgagee is entitled to safe harbor this leaves the Association transferring the loss to the other members of the Association.  As we know most foreclosure cases take on average 2 to 3 years to be finalized and therefore lose several years worth of assessments that the Association would otherwise collect if not for the safe harbor. 

So the question then becomes whether or not Judge Perlman’s ruling in this case will be adopted by other Judicial Circuits.  Or will Federal National Mortgage start litigating their own foreclosure actions and no longer require assignment of bids.