08/24/2011 12:11 pm ET | Updated Oct 24, 2011

Homeowner Associations Sue Banks, Taking A More Proactive Role In The Foreclosure Crisis

In a further indication of how far-reaching and deleterious the foreclosure crisis has become, homeowner groups have taken to suing banks in order to reclaim properties from delinquent homeowners, Bloomberg reports.

Across the country -- and especially in states with high foreclosure rates, like Florida, California and Nevada -- homeowner and condo associations are being forced to contend with homeowners living in properties they can't pay for, and banks that won't take action unless prompted by litigation.

Some 60 million Americans, or about one in every five, live in properties with homeowner or condo associations, according to Bloomberg.

The report underscores how deeply the foreclosure crisis has distorted American housing. In July, the number of homes entering foreclosure fell to a 44-month low, a statistic that says less about the solvency of homeowners than about the massive backlog of foreclosed properties that have yet to be processed and repossessed. In some states, it could take years or even decades to clear the docket of all the houses currently in foreclosure.

The backlog problem has been exacerbated by a widespread practice known as robo-signing, where mortgage lenders approve paperwork without checking it thoroughly or, in some cases, without reading it at all. The extent of the robo-signing problem became clear last fall, forcing banks to go back and re-examine thousands of foreclosure records.

As the foreclosure pipeline remains clogged, the swelling ranks of distressed properties may be creating a feedback effect, driving down the values of surrounding homes and pushing more families into foreclosure.

The depressed home prices, in turn, are thought to be holding back a recovery of the housing sector, a central component of the American economy that has yet to repair the damage it incurred during the financial crisis.

Amidst so many competing pressures, homeowner associations have begun to exercise some unexpected powers. In some cases, when homeowners fail to pay their association dues, the associations themselves are the ones to foreclose.

Association dues go toward community expenses like maintenance and repairs, and when one owner fails to pay their share, all the others have to pay a bit more. The economic slowdown of recent years, which has left millions of Americans either out of work or working fewer hours than they'd like, may have contributed to the pressure on homeowner associations to begin turning to more extreme enforcement measures, like foreclosure, when owners fail to meet their obligations to the community.

Still, there are numerous accounts of associations abusing this power and foreclosing on owners when other options are available.

Some owners might favor the newer approach, wherein homeowner associations sue the banks in order to take ownership of foreclosed properties. Bloomberg quotes a board member at a Miami condo association who expresses the hope that if one property, owned by a delinquent resident, can be reclaimed from the bank and sold, the association will "have a little money."

But for homeowners who have fallen behind on their payments and are running out the clock on foreclosure, the new approach may only herald further problems. A significant number of delinquent homeowners are currently in foreclosure and yet don't face the immediate possibility of losing their home, thanks to processing delays at banks, the New York Times recently reported. Proactive homeowner associations, however, could make property seizures a pressing problem for owners once again.