Given the growing concern about the cost of homeownership, no one would be surprised to learn that HOA liens are on the rise. But alarm bells started ringing recently when a new report found that a new HOA lien was filed every 90 seconds in 2025, or more than 280,000 liens throughout last year.
Clayton has offered an HOA monitoring solution for more than 10 years. To get a perspective on the rise of these liens, the risks they present to servicers and how HOA monitoring solutions are evolving to deal with them, we sat down with Crystian Lloyd, Senior Operations Manager at Clayton.
Q: First of all, were you surprised by the numbers in the new report?
Crystian: Not really, given the size and growth of the HOA/COA market. There are more than 370,000 of these associations, and by one estimate, about 8,000 new HOAs are established every year. These associations house more than 40 million properties and are home to nearly 70 million people.
Over the past several years, the cost of energy, labor and insurance have all been going up, and the HOAs have passed these costs along to their property owners. Now many of these owners, particularly those of fixed incomes, are struggling and falling behind on their fees.
In some of these markets, like Florida, which has seen a big jump in liens, conditions like higher insurance premiums due to past hurricane damage, new building codes for condos that require large assessments and a large retiree population, have come together to create a perfect storm. In other markets, like California and Texas, wildfires are the issue causing increased insurance premiums. Every market has experienced increased costs for insurance for various reasons as well as increased maintenance costs due to rising labor rates. No market is immune.
Q: What risks do these liens pose to servicers and why now?
Crystian: In super-lien states, like Colorado and Nevada, HOA liens can, under certain circumstances, move up into first position, superseding first and second mortgages. If that happens, the property goes into foreclosure and can be lost. It doesn’t happen often, but it does happen and even one loss can be costly.
Also, late penalties can, over time, add up significantly, increasing the amount that the servicer must advance. So as a best practice, servicers and investors need to monitor their portfolios for HOA liens.
Finally, HOA liens are often the “canary in the coal mine” indicating future mortgage defaults. If something has changed financially for a homeowner, the first thing they’re going to stop doing is paying the amenity fees. So, when you start seeing HOA liens aging and moving towards foreclosure, that is an indication that there is a higher chance that your borrower will default on their first mortgage.
Q: How does your solution work and how does it compare to other offerings?
Crystian: A servicer will send us a portfolio, maybe 50,000 or 60,000 records. First, we run them through one of the industry’s leading electronic databases to see if a property has a lien against it. The database only reflects the lien information available at the time the lien was filed. Many electronic HOA monitoring systems stop there, providing only a snapshot of the amount due when the lien was recorded.
There are usually additional charges that are continuously incurred on those properties. What we do is reach out to that HOA and obtain a payoff document for the client so they can remit payment and bring the account current. At the same time, we also check to see if properties are covered by additional HOAs or have other lower-level liens pending.
Also, we know there are some gaps in the coverage, and even the industry’s largest database doesn’t have records or lien information in certain counties. So as an additional precaution, we run a subset of the files that don’t show a lien through a separate system to determine if there is an association attached to the property or not. If there is an association that’s attached to it, we then perform a manual check.
What we’re always looking for are blind spots: additional HOAs associated with a property, a new HOA that may have been set up in the past quarter, an HOA that has waited until the last minute to file a lien after giving the homeowner one break after another and now is collecting a year’s worth of past due bills, etc. So, it’s good to conduct a second-level check for blind spots.
Typically, we recommend that our clients do at least a quarterly review. Servicers with significant exposure in super lien states may want to run these searches monthly, just to be on the safe side.