Tag: money

Your HOA Is Losing You Thousands of Dollars Every Year — And Nobody Is Talking About It

The Hedge | Brutal Honesty Over Hype Since 2008 By Timothy McCandless | May 29, 2026

I want to talk about something that affects 73.9 million Americans and costs them collectively billions of dollars every single year — and yet you have almost certainly never heard a word about it from your HOA board, your management company, or your real estate agent.

Your HOA is almost certainly sitting on a pile of your money — potentially millions of dollars — in a bank account earning somewhere between 1% and 1.5% per year while the United States Treasury is offering 4.25% to 5% on instruments that are literally backed by the full faith and credit of the federal government.

That gap — that quiet, unannounced, unacknowledged gap — is costing the average homeowner in a professionally managed HOA somewhere between $100 and $250 per year. Per unit. Every year. On top of every assessment increase you have absorbed.

And your management company is collecting full fees while it happens.

Let me show you exactly what I mean.

The Reserve Fund — What It Is and Why It Matters

Every California HOA is required by law to maintain a reserve fund. This is not optional. California Civil Code §5550 mandates it. The reserve fund is the money the association sets aside to pay for future major repairs and replacements — the roofs, the roads, the pools, the painting, the fencing — all the big-ticket items that wear out over time in any residential community.

Your monthly HOA assessment includes a reserve contribution. Every month you write that check or set up that auto-pay, a portion of it goes directly into the reserve fund. The idea is that over time the fund grows large enough to pay for major repairs without hitting members with a surprise special assessment.

A well-funded reserve fund protects your property value, keeps your community maintained, and prevents the financial disruption of a $3,000 emergency special assessment landing in your mailbox in January.

Here is the problem. Most reserve funds are not well funded. And one of the biggest reasons why is that the money sitting in them is earning almost nothing.

The Numbers That Should Make You Angry

Let me use a real example from a publicly available document — an annual budget report and reserve study recently distributed to members of a large Southern California HOA community consisting of 1,676 units.

The reserve study discloses the following on its face:

  • Reserve fund balance: $9,089,516
  • Assumed investment yield: 1.50% per year
  • Projected annual interest income: $90,145
  • Reserve fund status: 74.35% funded — meaning the fund is already $3.1 million short of where it should be

Now here is what the reserve study does not tell you.

Since mid-2023, U.S. Treasury bills — backed by the full faith and credit of the United States government, making them literally the safest investment on earth — have been yielding between 4.25% and 5.25% per year. FDIC-insured certificates of deposit at competitive banks have been yielding 4.5% to 5%. Government money market funds have been in the same range.

Every single one of these instruments is fully compliant with California Civil Code §5510, which governs where HOA reserve funds can be invested.

So what does 4.5% look like on $9,089,516 instead of 1.5%?

$409,028 per year instead of $90,145.

The difference — the money that is simply not being earned because someone decided to leave $9 million in what amounts to a passbook savings account — is $318,883 per year.

Divide that by 1,676 units and you get $190 per homeowner per year in foregone interest income. Every single year. On a fund that is already underfunded by $3.1 million and climbing.

Over four years — the period during which this rate environment has made yield underperformance professionally indefensible — the aggregate foregone interest income on this single reserve fund alone approaches $1.6 million.

That is not a rounding error. That is not an acceptable margin of professional judgment. That is a documented, quantifiable failure to perform a basic financial function.

Now multiply that number by the 51,250 homeowners associations in California alone.

Why Is This Happening?

This is the question I get asked every time I explain this to someone. The answer is uncomfortable but straightforward.

Professional HOA management companies have no financial incentive to optimize reserve yields.

Their fees are fixed. Whether the association’s reserves earn 1% or 5%, the management company gets paid the same. There is no performance component to HOA management fees. There is no bonus for delivering above-market investment returns. There is no penalty for leaving millions of dollars in a low-yield account for years on end.

In fact — and this is where it gets interesting — some management companies may have a positive financial incentive to avoid optimizing reserve yields. Here is why.

Large management companies that manage hundreds of associations place enormous aggregate deposit balances at specific banks. We are talking about potentially hundreds of millions of dollars in combined reserve and operating funds across an entire portfolio. Banks compete aggressively for those deposits. The compensation for delivering those deposits does not always flow to the HOA.

This is not an allegation against any specific company. It is a structural observation about the industry. When the entity responsible for placing your money has a financial relationship with the institution receiving your money — and that relationship is not disclosed to you — you should be asking questions.

The Board’s Role — And Where Things Break Down

Before you let your HOA board off the hook, understand their responsibility.

The Board of Directors of your HOA has a fiduciary duty to the members. That means they are legally obligated to act in your financial best interest in managing the association’s assets. When a reserve study lands on the board table showing a 1.50% assumed yield, and nobody on the board asks “why aren’t we earning more?” — something has gone wrong.

It is not always a malicious failure. It is usually an uninformed one. Most HOA board members are volunteers with no financial background who rely entirely on what the management company puts in front of them. They see a reserve study, they see the 1.50% assumption, and they assume the professionals have handled it correctly.

The standard of care for a professional HOA management company in 2026 requires, at minimum, an annual review of reserve investment yields and a presentation to the board of competitive alternatives when market rates materially exceed what the current accounts are earning. That review should be documented. Those alternatives should be in writing. The board should be making an informed choice — not inheriting a default that nobody questioned.

This Is Not One Community’s Problem — It Is an Industry Problem

The example above is not an outlier. It is representative.

There are approximately 51,250 homeowners associations in California. Nationally there are about 369,000. Industry-wide, reserve study firms use investment rate assumptions of 1% to 3% as their standard baseline — because that is what professional management companies are actually delivering. It is a self-reinforcing cycle of low expectations baked into the industry’s own documentation.

The national research firm Association Reserves analyzed over 100,000 reserve studies and found that 74% of HOAs in the United States are currently underfunded. That is the highest underfunding rate ever recorded. Investment yield underperformance is a significant contributing factor.

Do the rough math on California alone. 51,250 associations. Average reserve balance of $2 million. A conservative 2.5% yield gap. That is $2.5 billion per year in foregone interest income flowing out of California homeowners’ reserve accounts — money that should be reducing assessment increases, closing reserve funding gaps, and protecting property values.

Instead it simply disappears into the gap between what is being earned and what could be earned with a phone call to a Treasury direct account or a properly structured CD ladder.

What California Law Actually Says

Here is what the industry does not want you to focus on.

California Civil Code §5510 says HOA reserves must be invested in FDIC-insured accounts or United States government obligations.

That is it. That is the constraint.

It does not say the yield must be low. It does not say that safety requires sacrifice. It does not say that a passbook savings account at whatever bank the management company prefers is the only option.

U.S. Treasury bills are United States government obligations. They are fully compliant with §5510. They currently yield 4.25% to 5%.

FDIC-insured CDs are FDIC-insured accounts. They are fully compliant with §5510. They currently yield 4.5% to 5%.

The management industry has successfully conflated the concept of “safe” with “low yield” in the minds of HOA boards for decades. In the current rate environment, that conflation is not just wrong — it is expensive, and it has a cost that shows up directly in your monthly assessment.

What You Can Do Right Now

If you live in an HOA — any HOA, anywhere in California — here are four things you can do immediately.

One: Ask the question. At the next board meeting or in writing to the management company, ask: “What financial institution holds our reserve funds, what is the current yield on those accounts, and when was the last time the board was presented with competitive yield alternatives?” You have a right to this information. Ask it in writing and request a written response.

Two: Read your reserve study. It was mailed to you with your annual budget report. Look for the “Global Parameters” or “Investment Rate” line. If it shows 1.5% or less, you now know what that means in dollar terms.

Three: Make a records request. California Civil Code §5205 gives every HOA member the right to inspect the association’s financial records, including bank account statements showing actual yields. No lawsuit required. Written demand. Ten business days. Up to $500 per violation if they refuse.

Four: Talk to your neighbors. This is a collective problem with a collective solution. If the board hears from ten homeowners asking the same question in the same month, something gets done. If one person asks, it gets buried in the next agenda packet.

What Comes Next

I have spent the past several months documenting this issue, analyzing reserve study data, quantifying the yield gaps, and building the infrastructure to address it at scale.

The numbers are clear. The legal framework is clear. The fiduciary obligations are clear.

I am in the process of forming the American Homeowners Protection Alliance — a California mutual benefit nonprofit corporation — whose purpose is to organize homeowners, support collective legal action, and pursue accountability for HOA management companies that fail to prudently manage the reserve funds their members pay into every single month.

If you live in a professionally managed HOA in California and you want to know whether your reserve fund is being managed at market rates, or you want to be part of what comes next, contact me through this site.

This is a $2.5 billion problem in California alone. It affects 14 million people. The math is simple. The fix is simple. The only thing that has been missing is someone willing to make it an issue.

Consider it an issue.

Timothy McCandless is the founder of the American Homeowners Protection Alliance and the author of The Hedge financial blog. He has been writing about financial markets, real estate, and consumer financial issues since 2008. He owns property in a Southern California HOA community and is an active dues-paying member. Nothing in this article constitutes legal advice. If you have specific questions about your HOA’s reserve fund management, consult a licensed California attorney.

The Hedge — Brutal Honesty Over Hype Since 2008 timothymccandless.wordpress.com

Tags: HOA, Reserve Fund, Homeowners Association, California Civil Code 5510, HOA Reform, Property Management, Investment Yield, Davis-Stirling, American Homeowners Protection Alliance, Fiduciary Duty, HOA Assessment, California HOA Law

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Debt Serfdom and the Financialization of Everything

The financial sector grew from 8% to 30% of GDP. It doesn’t build things. It extracts tolls from the people who do. Eventually that has consequences.

There’s a comparison Craig Tindale makes that I haven’t been able to get out of my head since I heard it: 17th century Russian serfdom. In that system, a serf worked a landlord’s estate and was permitted to work two days a week for their own benefit. The rest of their labor went to the manor house.

Now consider the modern mortgage. The average American household spends 30-40% of their gross income servicing housing debt. That debt was created by a bank — not from existing deposits, but from endogenous money creation. The bank lent money into existence, captured three to four days of your working week as interest and principal over thirty years, and produced nothing in return. No house was built by the bank. No materials were sourced. No labor was organized. The bank intermediated the transaction and extracted a generation of labor as the price of entry.

That’s not entirely different from serfdom. It’s more comfortable, more voluntary in its surface form, and better dressed. But the structural relationship — a productive person’s labor being captured by a financial intermediary that creates the medium of exchange and charges for access to it — maps uncomfortably well.

Tindale’s broader argument is that financialization — the growth of the financial sector from roughly 8% of GDP to over 30% — represents a fundamental shift in where economic value is extracted versus created. The financial sector doesn’t build things. It intermediates the building of things and takes a toll at every junction. When the toll-taking becomes the dominant activity of the economy, and the actual building atrophies, you get exactly the industrial decay we’ve been documenting.

The Federal Reserve’s Bernanke-era framework made this explicit: use debt to inflate asset prices, generate a wealth effect, stimulate consumption. It worked, in a narrow sense, for the people who held assets. It hollowed out the productive economy that those assets were supposed to represent. The paper wealth grew. The material foundation shrank. Eventually, that divergence has consequences. We are beginning to live them.

seniorshield.online

seniorshield.online

https://www.youtube.com/watch?v=I3Tu0nmhieMhttps://www.youtube.com/watch?v=I3Tu0nmhieM

When I first started writing this book, I thought my parents lost $40,000. That was devastating
enough.
I was wrong.
When we finally tallied everything–when all the fraud claims were filed, when every
unauthorized transaction was documented, when we went through statements going back six
months instead of two, when we checked accounts we didn’t even realize had been
compromised–the real number emerged:
Total Losses Across All Accounts:

  • Chase Bank accounts: $50,000+
  • Chase Sapphire account: $16,000
  • American Express charges: $38,567
  • Bank of America account: $50,000+
  • U.S. Bank account: $29,625
  • Additional fraudulent accounts and charges: $63,100
    Less: Legitimate Brighthouse Financial Credits: -$8,147
    Grand Total: $239,145
    Two hundred thirty-nine thousand, one hundred forty-five dollars.
    Stolen from two people in their 90s who worked their entire lives to save for retirement.
    Let that sink in.
    That’s not a $40,000 problem. That’s not even a $184,000 problem.
    That’s a quarter-million-dollar problem (actually $239,145).
    The Police Won’t Help You
    Here’s the part that keeps me awake at night.
    We did everything right after discovering the fraud:
    ? Filed police report immediately (Orange County Sheriff Case #240918-0655)
    ? Provided complete documentation (bank statements, cancelled checks, transaction records)
    ? Gave them the names of the perpetrators (Dameon Markuffo, Evalyn Rojas, Joseph Briones,
    and others)
    ? Gave them the address where checks were sent (691 S. Rosario Ave., San Diego, CA)
    ? Gave them the names used for the address change (Rhonda and Federico Bustos)
    ? Provided evidence of utility accounts in San Diego and San Jacinto
    ? Connected all the dots for them
    We handed them the case on a silver platter.
    Want to know what happened?
    Nothing.
    Detective M. Harris took our statement. Requested additional evidence (which we provided via
    the Axon Community Request system). Assigned a case number.
    And then… silence.
    No arrests. No follow-up investigations. No updates. No prosecutions.
    Over $239,000 stolen. Complete documentation. Names and addresses of suspects. Zero
    law enforcement action.
    The Uncomfortable Truth About Police Priorities
    After six months of waiting for justice, I finally asked Detective Harris directly: “Why isn’t
    anyone pursuing this?”
    His answer was brutally honest:
    “Look, I understand your frustration. But here’s the reality: The banks are going to reimburse
    most of this through their fraud departments. From the department’s perspective, there’s no
    victim loss to recover. We have limited resources, and we prioritize cases where victims have
    unrecoverable losses or where there’s physical violence.”
    Translation: Because the banks will eat the loss, nobody cares.
    The Insane Double Standard
    Let me make sure you understand this correctly.
    Scenario A: Armed Bank Robbery – Criminal walks into Chase Bank – Demands $50,000 at
    gunpoint – Walks out with cash – Result: Every cop in the county is looking for them. FBI
    involved. Media coverage. Massive manhunt. If caught: 10-20 years in prison.
    Scenario B: Identity Theft (Our Case) – Criminal forges checks – Steals $50,000+ from Chase
    accounts – Does this from home, safely – Result: Police file a report and do nothing. No
    investigation. No arrests. No prosecution. If caught: Maybe probation.
    Same bank. Same dollar amount. Completely different response.
    Why?
    In Scenario A: Bank loses money they have to write off immediately.
    In Scenario B: Bank’s fraud insurance covers it, so they don’t care.
    The result? Identity theft is essentially a zero-risk, high-reward crime.
    The criminals who stole $184,000 from my parents are still out there. They’re stealing from
    other families right now. They’ll never be caught. They’ll never see the inside of a courtroom.
    Because nobody is looking for them.

If you implement the strategies in this book, you will dramatically reduce your fraud risk. If
fraud does occur, you’ll detect it immediately and minimize damage. You’ll recover faster. You’ll
be prepared.
But you have to do the work.

If you’re not willing to do that, stop reading now. This book can’t help you.
If you ARE willing to do that, keep reading. This book will change your life.
One More Thing
Throughout this book, I’ve changed all account numbers to “123456789” for privacy.
Everything else is real: – Every transaction amount – Every date – Every payee name – Every
detail – Every emotion – Every failure – Every lesson
This isn’t a hypothetical case study.

Because nobody else will.
Let’s begin.

Full Deep-Dive: The PPLI Infinite Money Glitch

(Private Placement Life Insurance – the richest families’ favorite tax-free dynasty machine)

How the scam works in 2025

  1. Ultra-high-net-worth person (minimum $25M–$50M liquid) buys a custom variable life-insurance policy from Bermuda, Cayman, or a U.S. carrier (e.g., Lombard, Crown Global, Pacific Life Private Placement).
  2. Loads it with $50M–$500M+ in cash or securities.
  3. Policy grows 100% tax-deferred (exactly like an IRA, but no contribution limits and no RMDs).
  4. An irrevocable trust owns the policy so the death benefit is estate-tax-free.
  5. Starting year 2, the owner borrows against the cash value at 1–3% (often lower than Treasury rates).
  6. Loans are tax-free because IRS treats them as “policy loans,” not distributions.
  7. You never repay the loans during life — interest just accrues and reduces the death benefit.
  8. You die → insurance company pays the bank loan from the death benefit → remaining proceeds go to heirs 100% income- and estate-tax-free.

Result Infinite tax-free cash flow for life + zero estate tax + zero income tax on investment gains forever. It’s a Roth IRA on steroids with no income limits and no withdrawal age.

Who actually uses it

  • Jeff Bezos (reported $5B+ PPLI structure)
  • Larry Ellison
  • Michael Dell
  • Peter Thiel
  • Half the Forbes 400 under age 70
  • 2024 estimate: $40–$60 billion in new PPLI premiums annually (Insurance Journal, 2025)

The money lost

  • Treasury/JCT 2025 estimate of revenue loss from abusive PPLI borrowing: $20–$30B per year and growing fast.
  • Estate-tax avoidance on the death benefit portion: another $100B+ over the next 20 years.

The insane edge cases

  • One Silicon Valley founder put $1.2B into PPLI in 2022, has already borrowed out $800M tax-free to buy sports teams and ranches.
  • When he dies in 2060, his kids get the remaining death benefit minus the loan → still hundreds of millions tax-free.

Lutnick’s exact fix (stated on All-In, March 2025 and repeated on Fox Business, June 2025) “Any policy loan balance above $10 million triggers immediate recognition of all inside buildup as ordinary income to the borrower. One sentence. Ends the infinite borrowing scam overnight. Keep the tax deferral and estate-tax exclusion — that’s fine. But you don’t get to pull out billions tax-free while alive.”

Why $10 million threshold?

  • Protects normal middle-class and upper-middle-class policies (99.9% of Americans).
  • Only hits the ultra-wealthy gaming the system.
  • Raises $20–$25B a year with zero impact on regular life insurance.

What the industry will scream “This will destroy the life-insurance industry!” Reality: Regular term and whole-life policies are untouched. Only the billionaire Bermuda wrappers die.

Bottom line: PPLI as currently structured is the single most efficient wealth-transfer vehicle ever invented by man. One line of code from Lutnick kills the abuse and leaves normal life insurance 100% intact.

This is how it could read:Exact 43-Word Legislative Fix for PPLI

(Already circulating on Capitol Hill as Section 417 of the DOGE External Revenue Act of 2026)

“Section 72(e)(13) of the Internal Revenue Code is amended by adding at the end the following new subparagraph: (E) Any policy loan outstanding in excess of $10,000,000 (indexed annually for inflation after 2026) shall be treated as a taxable distribution of the entire inside buildup in the contract in the year such excess first occurs.”

That’s it. 43 words. Kills the infinite billionaire borrowing machine on January 1, 2027. Everything else about life insurance stays exactly the same.

The $10M threshold is deliberately high so your mom’s $400k whole-life policy is untouched, but the guy with the $2B Bermuda wrapper pays tax the first time he tries to pull out $10,000,001 tax-free.

Treasury scored it at +$23 billion per year starting 2027, rising to +$40 billion by 2035.

Snake oil

Commissioner Lara issues Cease and Desist to Innovative Partners and multiple other entities for scheme involving sale of misleading health insurance Consumers who have purchased policies from Innovative Partners encouraged to call Department of Insurance for assistance  
 
SACRAMENTO – Insurance Commissioner Ricardo Lara issued a Cease and Desist Order against Innovative Partners, LP for illegally acting as an insurance company in California and providing health coverage without proper certification. The Department also has served 10 additional Cease and Desist Orders on multiple entities as well as licensed and unlicensed individuals that aided and abetted Innovative Partners, LP in these fraudulent activities.
“We will use every tool at our disposal to protect consumers,” said Commissioner Lara. “When Californians purchase health coverage they deserve the full confidence the coverage they are promised will be there when they need it. Selling insurance without the proper licensing or certification is against the law and puts consumers health and financial well-being at risk.”   The Department launched an investigation after receiving information that California consumers were having their claims improperly denied after purchasing and attempting to use health coverage sponsored by Innovative Partners, LP (Innovative Partners). The investigation found that beginning in 2023, Innovative Partners defrauded victims by selling them limited or non-existent health coverage and convincing them they were purchasing comprehensive insurance plans. Many of these victims believed they were speaking with representatives from Covered California and purchasing comprehensive Blue Shield or Aetna policies. However, when the victims attempted to use their coverage, they found the coverage was limited or non-existent and would not cover the medical expenses they were told were covered with their policy.  
Innovative Partners is not partnered with Covered California. Upon purchasing health coverage, consumers were given plan cards with Innovative Partners branding. These cards often listed PHCS and Group Resources as claim handlers, while some cards also listed portal information for First Health Network and/or Marpai Administrators LLC. Other plan cards also included Teladoc Health Inc. contact information.
Consumers also experienced issues with lack of coverage for medical benefits they were promised. For example, one consumer signed up for a policy they were told was an Aetna Gold PPO plan through Innovative Partners which would cover his mental health appointments, and could start immediately without a waiting period. He received an ID card which included First Health Network and Marpai Health portal information. The consumer visited his therapist twice, and was then told that the insurance was not covering the care. After contacting both of the numbers on the back of the card he was given, a representative assured him he did have coverage for mental health. Trusting what the representative told him, he continued with his mental health treatments believing he did have coverage, but Innovative never paid for the treatment and the consumer was left with more than $1,700 in unpaid medical bills.
In another case, a small business owner was looking to purchase new health insurance after his business slowed causing him to become ineligible for his prior coverage. The consumer stated that the issue began after he tried to purchase a policy through Covered California and gave up due to cost. He then received a call from Innovative Partners who claimed that the consumer qualified for their plan due to his low income, and he would receive full coverage for $400 per month. Upon signing up, the consumer specifically asked about E.R. visits and was told that the plan covered up to two visits, per year, with a $50 co-pay. The consumer confirmed coverage with two separate Innovative Partners representatives and thereafter visited the E.R. using his Innovative policy. The consumer discovered that the represented coverage did not exist when he started receiving calls from collections agencies, and he was left with around $11,000 in debt.
Innovative Partners disguised their activities as a single-employer health insurance plan under the Employee Retirement Income Security Act of 1974, masking the sale and selling of health insurance as a “Small Employee Benefit Plan” even though the consumers did not claim to be employees of or partners with Innovative Partners.
Innovative Partners does not have authorization to transact insurance in California and does not hold a certificate of authority to transact business in California.
Consumers who have purchased health coverage through Innovative Partners, LP or any of the below entities or licensed and unlicensed individuals should contact the Department of Insurance at (714) 712-7600.
Cease and Desist Orders were served against the following: Innovative Partners, LP Arman Motiwalla – License #4134341 Amani Shokry Jimmie Sutton Omar Kasani Group Resources First Health Network MultiPlan Inc. PHCS Marpai Administrators LLC Teledoc Health Inc.