Between 2024 and 2025, national HOA liens filed increased by 8.6%. It should come as no surprise then that HOA foreclosures jumped as well. A recent study covered by the Wall Street Journal shows that over the last two years, the number of HOA-related foreclosures rose by nearly 40%.
What do these numbers tell us?
First, it shows that community associations nationwide are struggling to manage staggered cashflow and unpaying homeowners. As insurance costs and inflation continue to soar, more and more homeowners are defaulting on the costs they think have the lowest impact: their community association dues.
More importantly, and more concerningly, it signals that Boards still view foreclosure as a viable solution to unpaid assessments. The reality is that, while liens and foreclosures have always been the recommended solution to HOA delinquency, it rarely resolves the debt.
Instead, HOA foreclosure leaves communities in a worse financial position than they expect to be, leading to further financial tension for the HOA.
Why Are HOA Foreclosures Rising?
One quote from the WSJ article claims that HOAs are “being forced into more aggressive collections to avoid their own financial collapse.” But foreclosure is supposed to be a last resort; the nuclear option. It is slow and expensive, and it puts a family home on the line.
Most Boards do not want to go to HOA foreclosure. It is a cost-prohibitive, risky decision that puts homeowners on edge. Boards choose foreclosure because they feel like they have run out of other choices.
The report points to several shifting costs impacting HOAs nationwide.
Rising Insurance Costs
In a post-Surfside world, HOAs nationwide are feeling the sting of growing insurance costs. One Long Island, NY community saw their insurance premium jump by $300,000. A dozen or more insurance providers simply stopped insuring community associations altogether throughout the state of Florida, driving up the cost of remaining providers.
Climbing Expenses
Cost of living is always top of mind when annual budgeting comes around. As inflation continues to, well, inflate, and the costs of goods and services increase, HOAs are faced with even more money to pull together just to keep the community running.
Shrinking Reserve Funds
As other areas of association funding grow, the area that takes the hardest hit is often the reserve fund. Rather than raising assessments appropriately to offset higher premiums or vendor bills, many Boards feel that the best solution is to minimally increase regular assessments and avoid upsetting homeowners and instead trim back the dollars being distributed to the reserve fund.
HOA Foreclosure is Not Recovery
What often gets left out of these reports is that a significant expense driving associations toward foreclosure is the legal bill that comes with it. Attorney fees, court costs, lien filings, and other legal options to manage delinquencies all add to the pile.
Legal fees and costs are “cost-forward” in that you must “pay to play.” By frontloading the cost of recovery, Boards end up spending more money to solve a money problem than they get in return. In the end, the communities are not made whole and often find themselves with an empty property that still is not contributing to regular assessments.
There is a better way.
Shift the Risk Factor
Rising expenses are a real challenge for community associations right now, and that challenge is not going away on its own. But the story does not have to end with a homeowner losing their house. The alternative to HOA foreclosure is finding a debt recovery option that shifts that risk off the community association.
Axela’s trusted collections solution does exactly that. With Axela Easy Collect, associations recover unpaid assessments without adding cost or risk to the community. All collection costs are passed through to the delinquent owner, and the association is never out of pocket for collections actions.
If your community is feeling the financial pressure described in this report, take the time to evaluate alternatives before diving into foreclosure.
Contact us today for your no-cost, no-risk collections analysis to discover how much more your community can recover by holding off on HOA foreclosure.
