Collections & Delinquency Tools Overview

Hello, I’m Russell Munz, founder and CEO of Community Financials. Today, I want to discuss our delinquency tools to help you collect money from owners who aren’t paying. Before we talk about delinquency, we need to first discuss collections. We email statements as courtesy reminders for owners to pay; this is included in our fee. If some of your owners don’t have email, we can send out coupon books or mailed statements for an additional charge. This also helps these owners pay by check.

We include a homeowner’s portal where owners can view their account balance and make a payment online at no additional charge, or pay by credit card, with the owner covering the processing fee. Then, we review your collection policy and update it with our process. If you don’t have a collection policy, we have a template you can use. This policy lays out the actions your community will take if an owner doesn’t pay their common fees. After reviewing it with your community’s attorney, a best practice is to send this out to all owners and let them know that you’ll be enforcing this collection process going forward. The next step is deterrence: we post late fees as provided for in your governing documents.

In a perfect world, none of the collection activities or corresponding fees that we talk about next would be incurred. As objective professionals, we are uniquely qualified to enforce the policy and help you collect your budgeted income. Our business is not designed to profit at the expense of the association from these services, but we pass the charges through to the delinquent owner for the extra time, administrative expense, and expertise these activities require so that the association can be reimbursed. As part of the collection policy, after the allotted period of time, we can send out courtesy late notices that are a friendly reminder of a past due balance. This reminder is usually effective in getting the attention of the delinquent owner, who will then call our office to discuss it. We charge $10 for this notice, which helps offset our staff’s additional time working with the delinquent owner. This fee is either offset by the collected late fee or can be posted to the owner’s account. The fee is billed to the association, and when the owner makes a payment, the association is reimbursed. Depending on your collection policy, we may send one or two late notices. We are not a licensed debt collector, so we do not get involved in more aggressive written letters, emails, texts, or phone calls to delinquent owners. That is when the board may decide to engage a collection attorney or our collection agency partner, Excella. If it’s the latter, the board requests this in advance with our team. If you work with your collections attorney, we may also send a final notice certified letter as the last step to alert the owner that they’ll be turned over to the attorney and will incur additional fees and risk a lien or foreclosure if they do not pay. We charge $85 for this, and it is billed to the owner’s account, so when paid, it will reimburse the association.

If you choose to work with Excella, they handle this letter, and it is billed directly to the delinquent owner’s account. A great tool in reducing delinquencies is to report past due owners to credit rating agencies; this step typically reduces past due balances by an average of 30% within the first year. If you use your attorney, we can do this, and it costs $25 per month for the delinquent owner, which we will bill back to the delinquent owner’s account. If you use Excella, this is included in their service. We charge a $39 per month collection action file monitoring fee. This covers the time our office spends communicating with the collection agency or attorney and the resulting owner ledger updates. This fee is also posted on the delinquent owner’s account so the community can be reimbursed upon collection. In our years of working with Excella, we are confident that the association has reimbursed our fee and also gets back their past due money.

So why did we choose Excella to work with? First, they’re national. Second, they specialize solely in working with HOAs and condominium communities. Third, their process is detailed and transparent. Fourth, their cost is the most reasonable. And lastly, they are effective. In my experience over the last 20-plus years, I have seen the bills from hourly collection attorneys; these bills in many instances would equal the amount of the past due monies collected, which left little to nothing for the association. Excella, on the other hand, only charges the association late fees and interest income as their service cost, and only if they are successful. All other expenses are paid for by the delinquent owner. In my opinion, it is the best solution. To learn more, watch the rest of this video where Mitch Dmer, Excella’s president, explains their service in more detail.

Good afternoon, my name is [Name], and I’m the president of Excella Technologies. Today, we are going to discuss how our company, a collections company that specializes in condominium and HOA collections, can recover the delinquent amounts due to your association from owners who have defaulted on their payments. It all starts with the fiduciary duty that boards of directors have, which includes recovering delinquent assessments in order to fulfill the mission of the budget. Our process is done on a merit basis. What do we mean? We do not carve out a percentage, say 30% or 40%, as a traditional collection agency might, but rather we charge fees that are passed through to the delinquent owner, and if we cannot recover them, we do not expect the association to pay for that. The fees to the owners are as follows: $399 for the initial underwriting fee. With that, we will show you in a moment what we do to do the underwriting for the community association. The late fees and late interest prescribed in your governing documents, if we recover them, we will retain them. We do this for three reasons. Reason number one: this is how we earn our money. Reason number two: this is what this money was meant for. Late fees and late interest are used to incentivize owners to pay on time, but if they don’t pay on time, then this money should be used to service the debt, and it makes a lot of good sense. And that’s reason number three: using debt to service debt is a very clever business decision. If we have to send out a pre-lien letter, that’s $85. And if we record a lien, that’s $299. We are so confident that we will recover our hard costs when it comes to the recording of the lien that we will actually pay out of pocket for the court costs and the legal costs to do that. All these fees are passed through and charged to the delinquent owner, and the association is not responsible to pay for them if we are not successful in collecting them. This is the underwriting again. When you have selected a unit and you’ve told your finance company, your bookkeeping company, to put it into collections, we will begin underwriting. The underwriting starts with a review of the property appraiser site to make sure that we have the right subject. We’re going to pull down the ledger and the mortgage from the court docket, and we’re going to find out what equity remains in the unit. This is a very important number to have, as we use it to discuss and begin conversations with debtors. We explain to them, “You have $50,000 worth of equity, and you owe the association $3,000. How does that make sense?” We work with that on every unit owner. We will run a skip trace. The skip trace will tell us all their contact information, asset information, where they live—everything that we need to know. The only thing that we don’t bring in-house are social security numbers, so you can be sure that we will not be the source of a data breach that would endanger anybody in your association. We will find out if the owner is in bankruptcy. If the owner is in bankruptcy, we cannot do many collection activities on it. However, we can monitor the bankruptcy and advise the association. If it’s a Chapter 7, which will be done in three to five weeks, we will monitor it, wait for it to be discharged, and then make your decision as to whether the owner is going to pay their post-petition assessments. If it’s a Chapter 13 and the post-petition assessments are not going to be paid or are not being paid, we will recommend that the association petition the court for an injunctive stay of relief to remove it from the bankruptcy so that we can begin collection efforts on that. Another important thing is if the owner has passed away. If they have passed, we will go to the probate court, pull the file, the docket, and see who the personal representative is. We will contact the probate court and advise them that there is an asset that needs to be protected, and from the liquid assets of the probate estate, they should pay or even remove the item from the probate. Finally, we will find out which bank or mortgage servicer is involved in the loan for the specific unit. When we know that, we will contact them and advise them that the owner is not paying. Often, they will pay for the owner because they do not want the association to foreclose, just like they don’t like when somebody doesn’t pay for insurance or when somebody doesn’t pay for taxes. This puts their position in danger. So these are the multi-channel efforts that we’re going to begin with and underwrite before we start our process.

Once we have everything understood and the fact pattern straightened out, we will begin our process by sending a Fair Debt Collection Practices Act letter, called a 1062, to the owner, advising them that a third-party debt collector has taken over the process and that they have 30 days to pay the debt, get involved in a payment plan, contact us, or take other actions. They can call, log into a portal we’re going to provide, and even pay from that portal. They have 30 days during which we will not call them, as required by federal law. It’s called the assignment period. But after 30 days, the gloves come off, and we will send them a notice of intent to lien, and we will send a copy of the notice of intent to lien to their bank. We will start with outbound phone calls, emails, text messages, certified letters—all kinds of multi-channel efforts to encourage the delinquent owner to step up and make a payment. Usually, in that time period—the first 30 days—we see an 18% success rate. In the next 31 to 75 days, on top of that 18%, we see about another 51% success rate, and then we keep moving forward.

After 75 days, we will actually record a lien or perfect the association’s lien, send a copy to the bank, and continue with outbound phone calls, email letter campaigns, and text messages—whatever outreach we can do. We will then file the lien. At this point in the process, usually between day 76 and 120, we get about another 26% of the people paying, leaving us with a very small percentage of people who have not paid—fewer than 5%. It depends really on how much attention you’ve paid to your collections previously, but that’s it. At that point, where we can’t move the needle, we can talk about a pre-foreclosure analysis, where we will determine if there’s equity in the unit and if it makes sense to foreclose on the unit.

When doesn’t it make sense? When the bank’s about to foreclose, when there’s a tax deed sale that’s been set, or when there is no equity in the unit. But this is for you to make an informed decision. If you decide that you wish to foreclose, we could use our network attorney or one of your network attorneys. This is not something that we pay for; the attorney portion and the foreclosure portion are paid for by the association. That is why we have a pre-foreclosure analysis, and we will be able to determine if it makes sense. If you wish to foreclose, we will move forward with the foreclosure; if not, we will just wait for something to happen. The technology we use is very important to boards of directors. Reports are available to your bookkeeping firm 24/7 and can be subscribed to by the board members. In other words, if you have a meeting on the third Thursday of the month, we could send this to you on the third Wednesday of the month, or your management company or bookkeeping company can provide these for you when you have a meeting or email them to you. Every touch, every call, every point of contact, and every phone call is recorded, inbound and outbound. You can see every letter, every proof of mailing, and hear every call. When we disperse money, we can also send you this report. Of course, your bookkeeping company will have this report, and you’ll see that $35,000 has been received and $35,000 has been sent to the association. This report tells you where to apply the payments. We could send our payment disbursements to you via check, or we could send them via ACH, which is much quicker and more convenient.

If the owner wishes to log on and resolve their own delinquency, they can do that. They can make a payment, request a payment plan, download the governing documents, dispute the debt, or even see their ledger. This is how the payment plan works: they will log on and select the number of months they wish to engage in a payment plan, and it will tell them how much they have to pay every month. The payment plan will include the time they are delinquent, so when they finish with this payment plan, it will result in a zero balance. That concludes my presentation. If you have any questions, please feel free to call and ask. I’ll be glad to answer them. Thank you very much. Goodbye.