In USA, condo super lien under attack
MEEB
30 December 2014
The Federal Housing Finance Agency has announced that secondary
market giants Fannie Mae and Freddie Mac will not purchase mortgages
with provisions that give another entity priority over the first
mortgage.
The agency’s primary concern is energy retrofit programs like PACE in
California, requiring homeowners to repay those loans as part of their
property tax bill and thereby giving the energy loans a priority
position. But the FHFA’s statement also singled out the superlien that
protects condominium associations as being equally unacceptable.
Although condominium priority liens have been in place in Massachusetts
since 1993 and even longer in some states, the FHFA’s concern was
apparently triggered by a recent Nevada Supreme Court decision
affirming the priority statue of homeowner association loans in that
state. In the Nevada case, the agency has asked the court to rule that
the HOA’s foreclosure sale is “invalid and contrary to federal law to
the extent that it purports to extinguish Fannie Mae’s property
rights.” The agency will file similar actions in other states “to void
foreclosures that purport to extinguish Enterprise property interest in
a manner that contravenes federal law,” the FHFA’s press statement
asserts.
Explaining its position, the agency notes that the priority status of
mortgages Fannie and Freddie purchase must be secure. This is one of
the “bedrock principles” on which their support of the housing market
is predicated, the statement notes. “As a result, any lien from a loan
added after origination should not be able to jump in line ahead of a
Fannie Mae or Freddie Mac mortgage to collect the proceeds of the sale
of a foreclosed property.”
The Community Associations Institute (CAI) has blasted the FHFA for a
policy that, the association charged, is designed “to bail out mortgage
servicers that lacked the competency to meet basic contractual
requirements and follow established rules of civil procedure.”
Condominium associations typically exercise their right to foreclose
under their priority lien only because mortgge lenders have themselves
failed to foreclose in a timely fashion on delinquent homeowners. By
targeting the HOAs rather than the lenders, Thomas Skiba, CAI’s chief
executive officer, asserted, the FHFA is ignoring other remedies
available to Fannie and Freddie to deal with “the mismanagement” of
mortgage servicers and is “trying to protect Fannie and Freddie at the
expense of association homeowners. That’s unfair, unconscionable and
unacceptable,” Skiba said. “CAI will continue to monitor FHFA’s hostile
actions against the right of community associations to secure priority
liens on properties within their boundaries,” he added.
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