Thousands of Poinciana residents face ballooning debt after HOA fees sent to collection agencies

Article Courtesy of The Orlando Sentinel

By Steve Lemongello   

Published December 23, 2015


Poinciana Villages, with nearly 70,000 residents and 23,000 homes, would be one of the largest cities in Central Florida if it were a municipality. Instead, it's one of the largest private homeowners association (HOA) in the United States.

But now the HOA is under fire for what residents say is a persistent and ongoing effort by outsourced debt-collection agencies to inflate back dues with thousands of additional dollars in legal fees and late charges.

Some of the estimated 4,000-plus homeowners whose debt was sold more than 1 of every 6 homes in the association say they've never received a line-by-line breakdown of what those fees actually are. And by the time they're able reach someone at the agency, their late fees and legal fees have doubled, tripled, quadrupled and more.

At issue, residents say, is the possibility of thousands of owners losing their homes because of ballooning debts that were originally only in the hundreds of dollars.

Steve Sepulveres, an attorney hired by Friends of Poinciana Villages, said he and others are concerned about how "the goal posts have been moved" for residents who have fallen behind on their dues.

"It's completely and utterly legal," Sepulveres said. "It may be immoral, but it's legal. But it seems like they don't want the money. If somebody came up to me and wanted to give a payment, I'd take it. It seems like the real money is in foreclosing on homes."

"All the people in the community getting these [charges] and fees thought they were unique," said resident activist Keith Laytham. "And it turns out there were thousands of them."

Working-class community

Poinciana began in the 1960s as a retirement community, but development by Avatar Properties since the 1980s has led to an explosion in population during the past 25 years. The average home value in the working-class community, half of which is Hispanic, is about $125,000 to $132,000.
Each household in the Villages pays an HOA fee $21 a month, coming to $252 a year that is used toward maintenance and upkeep of properties and common areas.

One homeowner, Benny Valentin, refinanced his mortgage for his $74,000 home. But he said he fell behind on his HOA fees during a period of unemployment at the height of the recession.

He owed about $800. But then he received a letter from attorneys for a debt-collection agency called First 100, telling him that with additional fees, he now owed $1,200.

"I started working nights, held garage sales and was finally able to get $1,200," Valentin said. He went to the homeowners association office and tried to pay it in person. "I even brought cash to the office," he said.

"I said, 'Here's cash!' only to be told that First 100 owns his debt, and the association couldn't accept it.

Three months later, when the law firm representing First 100 got back to him, Valentin said, he was told he now owed $1,800.

And so it went, with First 100's representatives taking months to return his calls and his debt ballooning again by the time he was able to talk with them. All the while, he unsuccessfully tried to work out a settlement, but payment was demanded in full.

The amount owed increased from $1,800 to $3,400, and then to $5,400. Meanwhile, he was told there was a new law firm he had to deal with, and then another.

He said last month that he had the $5,400 he was told he owed, in cash. But he just recently heard some more distressing news from a law firm that represents First 100: His debt had ballooned to $7,495.

All the while, he was never able to get a detailed breakdown of what the additional fees were, and how they were applied.

"I can only imagine that when the court date [arrives] in January, it's probably going to be $10,000," he said.

Representatives or attorneys from a host of involved parties either would not comment or did not return repeated requests for comment during the past four weeks. They include developer Avatar; Association Capital Recovery, or ACR; Association of Poinciana Villages; FirstService Residential; First 100; and McGabe Law Group.

'I don't want to lose my home'

How did everything get to this point?

The master board of Poinciana Villages is made up of representatives of the nine "villages." In 2013, the board voted to hand over HOA operations to property-management company FirstService Residential.

Shortly afterward, FirstService sold off the HOA debt of about 2,000 members to First 100, a company based in Nevada.

First 100 then hired three different law firms to handle collections and has since purchased even more debt, amounting to 3,499 accounts, according to one of the firms itself currently involved in a lawsuit against First 100.

ACR bought the back-dues debt of an additional estimated 1,000 Poinciana residents, including Rebecca Sauls and Migdalia Colon.

Sauls has lived for 20 years at the very point of the jagged border between Osceola and Polk counties, which divides the community almost in half another reason that sorting out legal matters has been so difficult and why Poinciana has often been stymied in its attempts to incorporate as a single city.

Sauls said she fell behind by just a few months, but when she tried to pay it back in full, she was told the account had already been turned over to ACR.

"I tried to get a list of what the charges were, but it was complicated," Sauls said. "I had a fight with the collection agent, because they said they could not provide that information. They said to wait another 30 days. I spoke with another agent over the phone, and they said they could not print that out."

She said she finally was able to get up to date on the $788 she ended up owing, and she considers herself lucky it didn't increase any further.

"I went around in circles," Sauls said. "The structure of billing and notification is out of control."

Others haven't been so fortunate. Colon, of Canterbury Court, said she fell behind on her annual $242-a-year HOA fees for a year or so when she left her job to take care of her disabled son for several years. She was eventually informed she now owed more than $6,000.

"I first called [ACR] and left a message, and they never called me back," Colon said. "I called again, and they finally talked to me, and they said I can't make arrangements or anything because it was too much money."

The matter ended up in court. At one point, she said arrived for a court date in July, "and nobody showed up at all."

The case was dismissed by a foreclosure judge because of the Association of Poinciana Villages' "failure to appear." But the foreclosure attempt is not over yet.

"Now I have to show proof I did go to court and no one showed up," she said. "It's bad. I [worry] they don't want to hear anything, they just want to take my house away. I don't want to lose my home."

Fear grows among residents

A group of residents has joined to form the group Friends of Poinciana Villages in order to bring attention to the issue, which they said has been exacerbated by a split on the HOA board.
So far, the only proposal coming from elected officials has been a local bill by state Sen. Darren Soto, D-Orlando, attempting HOA election reform, but it was voted down 3-2 in a party-line vote at a local delegation meeting.

Republicans said it would have an unknown effect on smaller HOAs and that any reform needed to be statewide.

In the meantime, residents are worried about where all of this is heading.

First 100 has been open about its strategies in its home state of Nevada, where it raised the ire of mortgage lenders when it jumped ahead of them by foreclosing on properties because of back HOA dues often minuscule compared to mortgage debts.

The Wall Street Journal reported in 2014 that a Nevada court decision would allow thousands of foreclosed homes to be put up for auction by HOAs and sold, "extinguishing the first mortgage" and allowing the private company that bought the HOAs' debt to get title to the home for "pennies on the dollar."

"This is one of the greatest returns in real estate that I've ever seen," First 100 Director Jay Bloom told the Journal at the time.

Florida law does not allow liens on HOA fees to jump ahead of mortgage liens so if First 100 or ACR forecloses on a home because of unpaid HOA fees and additional charges, the mortgage lender is still the primary lien, and either company would be responsible for that mortgage.

"So [the companies] can legally foreclose on a home, but if they can't work something out with the banks," they could be in trouble, Sepulveres said. "But at some point, they could work out a deal to pay off the first lien at a discount rate. If they get enough buying power with thousands of homes in the area? They could get a package deal."

Valentin also thinks that the continuous delays are just a method of foreclosing on his home which, as the economy increased and the neighborhood grew, could now be worth $140,000, almost double his mortgage.

Shortly after his interview, he announced he would be running for a state House of Representatives seat, with Poinciana's troubles as the spur for his entry.

"I'm a blue-collar, hardworking, middle-class citizen who doesn't depend on the government to survive, who puts food on my table," Valentin said. "What am I going to tell my wife and kids?"