What is a mortgage?
A mortgage is a loan taken out to buy a condo or home within an HOA community, with the property itself serving as collateral for the lender until the loan is paid off. That’s separate from a mortgage the association itself might take out against its own property to fund a major repair or capital project, which is a distinct debt from anything an individual owner owes.
Why does a mortgage matter?
How a homeowner’s mortgage lender ranks against an HOA’s own lien matters a great deal if that homeowner ever falls into serious delinquency, since mortgage liens typically take priority over an association’s claim in a foreclosure.
When You’ll Run Into This
This becomes relevant to a board mostly during a foreclosure or when confirming a property’s financial standing through an estoppel letter.
Legal note: this is general information, not legal advice. Rules and requirements vary by state and by community, so it is worth checking with your association’s attorney to get an accurate answer for your specific situation.
