My Twitterpal Melissa Garcia, (@ColoradoHOAGal) pointed me to this article in the Miami Herald, which explains the mechanics of a typical reverse foreclosure. Reverse foreclosures are being pursued by community associations throughout the country, as associations find themselves stuck with units on which the owners will not pay and on which the lenders will not foreclose. The problem arises everywhere, but particularly in those states with higher foreclosure rates.
A condominium or homeowners association (HOA) that forecloses a unit upon which there is a senior lien will not be able to take title, but will be able to get access to the unit, and presumably put some pressure on the lender to step up to its obligations. The law is still developing in this area, so watch for new developments as some cases are decided.
The article also quotes another frequent blogger and twitterer, Donna Berger, (@CondoandHOALaw); Donna wisely recommends that associations rent the units after taking them from the banks.