Dunning (as defined by answers.com): (v) the process of communicating with customers to ensure the collection of accounts receivable. Dunning can start with gentle reminders and then progress to nearly threatening letters as accounts become more past due. Laws in each country regulate the extent to which dunning can take. It’s okay to issue firm reminders, but generally unlawful to harass or threaten customers.
In the West Palm Beach area, which still leads the nation in foreclosures, there is always something new and exciting being suggested to try and “bleed money from a stone.” The current economic climate, as well as the attitude of some homeowners that it is OK to simply forget about paying their monthly maintenance fees, and walk away from their mortgage obligations, has led to a myriad of companies, as well as strategies to collect debt. One of the newest of these is called a “dunning service.”
This new type of HOA collection method is being facilitated by National Account Executive with NCSPlus Asset Recovery System’s Richard Slater especially for HOAs (homeowner associations) across the country. For decades horror stories have emanated from across Texas regarding the aftermath of onerous third-party collection practices that kicked homeowners out of their homes for nonpayment of assessment fees as well as stripping their bank account of funds.
The company operates on “Three R’s” of their dunning process:
Restoration – restoring the communication between the homeowner and the HOA;
Reconciliation – the parties reconcile the amount owed and
Recovery – the homeowner recovers their good standing and good credit and the homeowners association recovers their essential funds.
“The 3 R’s part is great (at least on paper). Certainly before foreclosing, the Association should try to: 1) communicate with the owner; 2) agree on the amount owed; and 3) agree to a plan under which the Association eventually gets paid and the owner is no longer delinquent.
The flaw (to me) is that if the process fails along the way (any of the 3 R’s are not or cannot be achieved), then their solution is to post a bad mark on the owner’s credit history. What does that do for the Association? Nothing. Many if not most owners who are at this point with their Association, either don’t care about their credit score or it has already been demolished.
The threat of foreclosure is still the best bet of getting someone who will not cooperate or try to enter into a payment plan, to ultimately pay” ” stated Donna Berger, Managing Partner of the statewide community association law firm of Katzman Garfinkel & Berger (www.kgblawfirm.com) and the Executive Director of the Firm’s not-for-profit Community Advocacy Network (CAN) (www.canfl.com).
According to NCS Plus, this dunning service never leads to a foreclosure. If the debt proves to be uncollectible, it will go on the homeowner’s credit report and lower the credit score. This process is also in compliance with Texas’ new law (HB 1228), as accounts are not assigned or pledged and there is no ‘transfer of interest’ to this dunning service.
“Communicating with owners to ward off foreclosures is always a good thing. I don’t think there is anything novel with what this company is doing. There are associations achieving very similar results by entering into reasonable payment plans with delinquent owners. I don’t know how they could say that foreclosure is never an option because there are times when foreclosure is the only rational option. “The thing that struck me most was the name of this company.” Berger continued. “Typically the word “dunning” has negative connotations as conjured up by anti-dunning laws (designed to prevent harassment of debtors) and dunning letters.
There is no easy answer to solving the housing crisis, as well as the remnants of the Great Recession that still paralyze certain segments of the economy. If you ask more than a few attorneys, property managers, and bloggers what the answer to the foreclosure issue in HOAs is, you will get more than a few different answers. All of them only have one thing in common, however: money! Money, as they say, makes the world go around. For the time being, however, I think that most of us would prefer to simply keep our footing, even if means rotating in place.
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