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Homeowners Association Banking

A podcast about the unique considerations associated with homeowners association banking.

Welcome to Community Wise.  Brought to you by Wise Property Solutions.


Joe Wise:               We’re joined today by Sean Madigan, the Manager of Sales and Support for Mutual of Omaha Bank, and specifically their Community Associations Banking Division.  Sean is also the treasurer of the Community Association Institute’s Central Arizona chapter and also serves as his homeowners’ association treasurer.  Welcome Sean.


Sean Madigan:      Thank you, Joe.


Joe:                        Sean, as a homeowners’ association comes to work with a professional community management firm in many cases there’s a need to engage in new banking relationship with your bank or one of the other national banks that has a niche to that industry.  Tell us a little bit about why that makes sense and how for homeowners there really is some value in their association banking with such a bank.


Sean:                     Well Joe, one of the things to consider when you’re looking at a bank and looking at financial institutions is the ability for the bank to understand the needs and the differences between our industry.  Our industry has a very specific focus in processing payments and in working through.  So when you’re looking at a specific bank that does specialize in association banking one of the things that you want to look at is its ability to be able to do lockbox processing but one of the things that’s important behind that is how quickly can I get that data back to your management company.


As you’re working through and you’re sending in the payment as the homeowner, how quickly is that data getting back to the manager to be able to post it into your account.  So a lot of things that you have to look at is is does the bank have the ability to specialize in those types of lockbox processing.  Are they fast and easy to be able to access the funds right away, which is another huge availability to be able to do that?  But also in the same page be able to do research, be able to gather data if something needed to be researched.  How quickly can you do that?


Joe:                        Let’s talk about security in the lockbox.


Sean:                     Sure.


Joe:                        If I’ve been in a homeowners’ association and until we hired this management company I could leave a check in somebody’s storm door or in a dropbox somewhere on property but now I’ve got to mail it to Arizona or Nevada or Atlanta.  Why is that in fact preferable to a dropbox or somebody’s storm door?


Sean:                     Well number one, Joe, obviously processing your payment with a bank that specializes in that area is the focus is that that bank specializes in those processing.  Most banks will have individual P.O. boxes that will be designated for the management company.  Those P.O. boxes are swept on a two or three times a day and processed immediately.  So from a security standpoint that’s actually one payment channel.  There’s a number of payment channels with those types of things.  There’s online payments through credit card or online payments through ACH, recurring payments, using your own bill pay service to be able to make those payments.  So one of the security points is be able to data transfer all of that information.  Not having to, you know, put the check in somebody’s mailbox and hope that somebody picks it up.  Funny that you mention that, I was talking to a homeowner just recently where they needed to mail payments and they thoughts the payments were – instead of scanning the payments in or sending the payments directly to the bank through the secure channel that we’re offering, they took the opportunity to put it in a box and ship it out there with some other payments.  Well the payments never were received and they weren’t posted.


Joe:                        So there’s some security in it for the homeowner in that their check isn’t sitting in an unsecured mailbox or in an unsecured storm door or being transited around in somebody’s car.  It’s going straight to a post office box and then straight into a secure payment processing facility.  What are the advantages to the homeowners’ association about the lockbox services for processing those recurring payments?


Sean:                     Well, obviously one of the advantages right away is the ability that the funds will be available to the association and posted into the account for payables.  It’s posted – we’re transmitting the data back to the management company to be posted in their accounting software, etcetera.  There is also obviously the ability to have other services with the bank in the line of interest paid on operating accounts or money market, the ability to use other services that are with it.  There are a number of financial avenues for an association to be able to run with.  And if you’re managing those things through one specialized bank instead of having to go to three different banks or five different banks there’s plenty of options for them that are out there.


Joe:                        Are there other features of the relationship with a specialty bank, like Mutual of Omaha, that board members need to be conscious of because of their unique value that they bring to an association?


Sean:                     One of the things that you want to consider from a specialty perspective is does the bank have the ability to be able to offer different channels of payments to be able to come in.  Does the bank offer opportunity for the board to be able to go online and review their account and posting that goes with a read only status.  But how quickly are you offering services to the manager as they need information to be able to come in there?  How often do you have a situation where the manager needs to post something right away?  Can they pick up the phone and make a phone call right away to somebody and have somebody answer it.


There are a number of different options.  In our case we actually have a dedicated relationship manager that’s assigned to the management company who will be able to manage the payments.  That person can pick up the phone and make a call or they can email them, ask for a check request or check images or things that they might need.


Joe:                        Having that specialty relationship is also important because of some of the other ancillary services that homeowners are coming to expect.  Talk a little bit about the options that homeowners have in terms of making their payments, the speed with which their existing bank’s online payment options can be transmitted.  Say a little bit about some of the advantages of working those channels through a partner bank.


Sean:                     So, as we talked earlier, there are a number of payment channels that we have available or there are a number of payment channels that are available.  So a traditional payment — or a coupon book – we’ll call it coupon and a check payment, would be processed through our regular processing center.  But we also have the ability for the homeowner to go online to our specific-, to the association’s – to the website – be able to make a one-time payment either though credit card or through ACH.  ACH payments are at no cost.  There is a convenience fee on the credit card side.


There is another channel would be through your bill pay service.  And in some cases the management company may be able to capture that ACH and have a recurring payment and transmit that information.  So we have a couple of channels for homeowners that (a) make it easy for them.  The payments are posting in their account on a regular basis.  There’s a number of ways that the data can be transmitted to the management company.


Joe:                        As you work with homeowners associations and management companies around the country you encounter lots of questions no doubt where there is concern about the safety of the money, the reliability of the bank, the reliability of the systems.  Are there any other points you would want to draw out for the benefit of our listeners to more fully understand how this is not only a viable option, in many cases it is by far and above the best option for a homeowners’ association’s banking relationship.


Sean:                     Well Joe as we talked earlier, where the association and the industry, the banking industry in general, that specialize in this type of field one of the things that you’re always is – we had talked about it earlier – is the ability to be able to make it easy for the management company or for the board to be able to get funds and be able to process the payments.  You know, Mutual of Omaha — in the case of Mutual of Omaha Bank we’re a Triple A rated insurance company, we have a number of ratings on Banklink – and most banks that are in the industry are going to have the ability to do that.  But I would encourage board members and for managers to be able to look at what banking relationship they are able to get into and where do they rank?  How does a bank rate in the different fields that are out there?


Joe:                        And ultimately when something is more efficient for the management company it allows critical management resources of time and staff to be devoted to far more productive things on behalf of the client association.


Sean:                     Correct.  If the manager is obviously not having to deal with processing payments or hand posting payments into a system or working through an institute that doesn’t specialize in it then he or she isn’t able to be able to go out into the field to be able to manage or to take care of much more important things that are out there for the association.


Joe:                        And ultimately the homeowner service experience suffers as a result.


Sean:                     Absolutely.  If your manager is out there taking care of things that typically your bank can handle then he or she isn’t going to be able to take that phone call from you or be able to manage it as effectively if he could if he was using a bank that specialized in this industry.


Joe:                        Well Sean Madigan of Mutual of Omaha Bank, we thank you for your time and appreciate your insights on the questions we’ve asked.


Sean:                     Thank you, Joe.


This episode of Community Wise was hosted by Joe Wise and is a production of Wise Property Solutions.  For more helpful information, visit on the web at wisepropertysolutions.com or you can view our blog and sign up for our e-newsletter.

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