April 22, 2020

Money jar spilling over it's coins, with cutout news paper print: housing market, money, payments, work, student debt

Coronavirus Increases Community Association Delinquencies

April 22, 2020


The novel coronavirus triggered versions of stay in place or quarantine orders in many American communities in March.  The initial April data already demonstrate an increase in community association delinquencies.
Since 2008, LM Funding has tracked several data points to predict the rise and fall of community association delinquencies.  Data with respect to unemployment, rents, mortgage defaults, cell phone payments, cable bills, and car payments provide early indications for community association delinquencies.  Interestingly, the anecdotal evidence and data suggest Americans seem to prioritize these regular monthly bills in order – cell phone, cable bill, mortgage payment, car payment, and rent.  The reasons make for great conversations about how people face the crushing challenge of matching their unemployment revenues to their limited resources.  For instance, cell phones and cable service can be easily terminated and that might explain their priority of payment.  Whereas, eviction and mortgage foreclosure require judicial processes that invite a debtor to withhold payment for six months or more until faced with moving out.  Community association dues carry a similar priority from a legal perspective, but still tend to be an afterthought unless the community asserts its rights early and often.
Early April data indicates default rates on rents due April 1 suggest condominium and homeowners’ association delinquencies will rocket from under 3% in March to in excess of 10% for April.  Many governments have suspended evictions and foreclosure sales but continue to accept filings and pleadings to advance these cases.  Unlike in 2008, most newly delinquent homeowners of 2020 are not to blame for their circumstances.  But the financial obligations of the COA and HOA continue and must be borne by their members whether all pay, or 80% pay.  Associations with adequate reserves can use their reserves to bridge the gap until all members pay current or the courts resume foreclosure sales.  Associations without adequate reserves should look to funding sources that leverage the associations’ receivables to provide current cash.
LM Funding provides cash to community associations in exchange for an interest in an association’s delinquent receivables it collects for the association in the future.  Contact us at Info@LMFunding.com or visit our website LMFunding.com to learn how it works.

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