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Condo/HOA Collections 101: Underwriting in HOA Collections

What is Collection Underwriting for HOAs?

Underwriting in the collections field is creating a profile of property with delinquent assessments, and the owner of the property. Knowing the property’s profile, including the amount owed to the community association, and its legal status is critical. Not having the fact pattern can impede a collections effort. Importantly the aspect of underwriting centered around knowing who and where the debtor is is vital.

Why Should my Community Association Care about Collection Underwriting?

Underwriting is important because it gives your collection efforts all the information required to obtain a successful outcome. It’s important to know all that you can about the case, the individual debtor, and the community before an attempt is made to recover money owed to the Association.

A good job at underwriting is the foundation  needed to make the effort  successful – the Association receives the money it is owed, and the homeowner is treated fairly

What Does Underwriting Mean?

Underwriting is usually associated with the process a lender may use to determine the risk factors in giving a loan. The name originated when a loan was presented, each participant on the loan would write their name “under” the amount of risk they were willing to take. Today, underwriting covers many aspects of the financial world and it applies to the collection of condo and HOA debt.

How Does HOA Collection Underwriting Work?

Some key factors to the underwriting process for community associations:

· Reviewing the ledger to be sure that the amount owed is correct.
· Knowing which bank holds the mortgage on the property, if any.
· Checking to see if the debtor is in bankruptcy or has a number of past due accounts.
· Confirming that the person who has their name on the ledger is the legal owner of the property.
· Knowing where the delinquent owner is and all of their contact information
· Having a good idea if the property has equity in it based on local property values.
· Investigating if there are other debtors and liens on the property.
· Underwriting also includes a complete asset review of the delinquent owner.
· The idea is to get up to date information on the debtor so that the debt can be pursued legally.

Why do HOA Collection Agencies Use Underwriting?

Underwriting a debt file helps the collection agency know more about the debtor’s situation, the property value, and the condition. This is most helpful when the time comes to engage a delinquent condo or HOA owner to resolve the debt. The more the collection agency knows, the more options it has to customize a solution and resolve the debt.

What do HOA Collection Underwriters Look For?

Finding out the contact information of the delinquent HOA or Condo owner is the cornerstone of underwriting. If you cannot engage a delinquent HOA or Condo owner then there can be no way to let them know they are in debt or come to a resolution. Once you communicate with them, it’s possible to begin a helpful dialog and value exchange. It is not about threats or harsh persuasion, but rather a personal way to work out a problem.

Is HOA Collection Underwriting Conducted Once for the Entire Association, or is it on a Case by Case Basis?

A good deal of underwriting consists of a review of the governing documents including the adopted collections policy and that only needs to be done right. However, each delinquent file is different and each debtor has unique circumstances. Some of the underwriting is done once for the association, but a majority of this work is done on a case by case basis in order to create a successful outcome.

How Long Does the Collection Underwriting Process Take?

With the advanced technology of Axela provides, the process takes no more than two days.  Our proprietary technology has the ability to find the information that is required quickly, so we can get to work on your collections as soon as possible.

Once this information is gathered, it is onboarded onto Axela’s platform. The only thing that requires human capital is the review of the Association’s governing documents including the adopted collection policy, to be sure the Association is acting in compliance with the CC&Rs.

What would cause collections underwriting to be disapproved?

Improper record keeping!  If a file was submitted that said John Doe is the owner of said property, and it is determined that the public records show that the Sammy Smith was the owner, then that puts a hold on everything until the proper owner can be determined.  You certainly cannot pursue a debt on a person if that person does not owe the money. 

If an owner is discovered to be actively in bankruptcy the Association’s debt collection may be suspended until the bankruptcy court discharges the case. Also, if the ledger has been badly maintained that the amount of the debt asked to be collected is not verifiable,  this will cause a case  from being on boarded to our systems.

What happens if an HOA collections case is denied in underwriting?

If a file is incomplete or inaccurate neither Axela Technologies nor any other collection professional will have any other choice than to return the file to the management for clarification.

It is vital that community associations keep their records straight or cases like this will never get resolved. It is recommended that a review of data retention policies be done at least once a year to be sure that the records are in good order.

Who can conduct underwriting?

Most underwriting can only be done by licensed professionals as there is sensitive information that is revealed and must be kept confidential. Debt collection is a highly regulated industry and collector-debtor confidentiality is required under penalty of legal action. Both Boards of Directors and Community Managers are protected when they rely on the advice of experts, so always use professionals schooled in debt collection.

What happens after collections underwriting?

When the underwriters have completed their task and the ledger and a fact pattern has been established it is time to move forward with the collection efforts.  Both Federal and State law have protocols that must be very carefully followed in order to give the debtor notice and time to resolve the situation. It all starts with an initial demand letter and then escalates to outbound calls, demand notices, notification of the owner’s Mortgagor, credit bureau reporting,  lien filing, and other steps to encourage the owner to pay. There are many paths to successful collection and all must be considered in the context of State and Federal law, together with compliance with the Fair Debt Collections Practices Act.

How much would collections underwriting cost my community association?

At Axela Technologies, all fees and costs are passed through to the delinquent owner so that underwriting or any other collection activities are risk-free to the community association. Be sure to read the fine print on your contract! Other collectors will often charge for every action taken and expect the association to pay as they go along. The same may be true with attorneys.

Want to Know More about HOA Collections?

More about the collections process will be revealed in this continuing series on how collections are done in community associations to sustain the cash flow for your condo or HOA. Read other articles in the series here.

If you are a stakeholder in a community association (Condo or HOA) such as a manager or board member you will be faced with those owners who do not pay at all or on time. You can try to work with them but if you need professional help the best place to start would be a collection agency such as Axela-Technologies. We have the tools, the trained staff, the underwriting department, and the methods to recover your delinquent assessments.

Click here, for a free collection analysis of your delinquencies and what we can do to bring that money back into your operating account.

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