Super-priority liens have emerged as a huge threat to home lenders in some states because
the mortgage can be completely wiped out when an HOA forecloses.
In a Nevada case, an $885,000 first mortgage was wiped out when a $6,000 debt owed to an HOA was foreclosed. That decision was affirmed by the Nevada Supreme Court last summer.
On Tuesday, the Federal Housing Finance Agency — which regulates Fannie, Freddie and the Federal Home Loan Banks — issued a statement on HOA super-priority liens.
FHFA said that Title 12 United States Code Section 4617(j)(3) states that while it is acting as conservator for the pair of secondary lenders, no “property of the agency shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the agency.”
The regulator said that the law
precludes involuntary extinguishment of the government-sponsored enterprises’ liens as long as they are operating in conservatorship and preempts any state law that purports to allow holders of HOA liens to extinguish a GSE lien, security interest or other property interest.
“FHFA has an obligation to protect Fannie Mae’s and Freddie Mac’s rights, and will aggressively do so by bringing or supporting actions to contest HOA foreclosures that purport to extinguish enterprise property interests in a manner that contravenes federal law,” Tuesday’s statement said. “Consequently, FHFA confirms that it has not consented, and will not consent in the future, to the foreclosure or other extinguishment of any Fannie Mae or Freddie Mac lien or other property interest in connection with HOA foreclosures of super-priority liens.”