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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