In a statement released by the Federal Housing Finance Agency and reported in DS news the Federal Housing Finance Agency ("FHFA") has indicated that it will aggressively protect the lien position of mortgages backed by Fannie Mae and Freddie Mac. Certain energy retrofit financing programs adopted by states and municipalities and homeowners' associations are given super-priority for the sums due them.
They have the ability to wipe out the lien securing a mortgage in the event the HOA or energy financing program is forced to foreclose its lien to collect sums due. Some energy financing programs are being treated as tax assessments (and taxes always take priority), and about 20 states have enacted statutes which give HOAs super-priority for their fees and assessments. I previously posted two blogs regarding the HOA super-priority lien in Nevada, one dated 09.27.2014 and an update to that dated 10.22.2014.
FHFA indicated in its statement that, "FHFA is acting in furtherance of its statutory obligations as regulator and conservator of Fannie Mae and Freddie Mac". The statement further indicates that, "[t]hese FHFA actions are based on federal law which precludes involuntary extinguishment of liens held by Fannie Mae or Freddie Mac while they are operating in conservatorships and bars holders of other liens, including HOAs, from taking any action that would extinguish a Fannie Mae or Freddie Mac lien, security interest or other property interest. Specifically, Title 12 USC Section 4617(j)(3) states that '[no] property of the Agency shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Agency, nor shall any involuntary lien attach to the property of the Agency.' "
This seems to be a hot topic for FHFA and may effect the ability of some buyers to obtain financing in common interest communities in states that have afforded HOAs with super-priority liens for fees and assessments which are past due. There is a super-priority lien in CT which is limited to an amount equal to the common charges due for a period of six months, and the Nevada statute provides for a super-priority lien for common charges due for a period of nine months. The sums due HOAs are relatively small and they are given the ability to foreclose out a mortgage that is extremely large by comparison. This is of particular importance in states similar to Nevada where the HOA has the ability to foreclose without judicial action. If you are involved in selling, buying or financing units in common interest communities, you need to be aware of the laws in your state regarding the liens of HOAs.
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