[WSBARP] Condo Association Superpriority Liens vs. FHFA: Ninth Circuit Speaks

Wed Aug 30 15:24:52 PDT 2017

This decision does make a mess for condo HOA foreclosures. The Nevada
statute appears materially similar to Washington's to my eye - the HOA's
lien is only prior to a mortgage that was recorded before the default in
assessment payments to the extent of 6 months (WA) or 9 months (NV) of
budgeted assessments. The statutory language is very similar - I believe
they are both based on uniform acts.

The decision doesn't mention whether the condo declaration in question
mentions the HOA's lien rights and priority. I wonder if that would make a
difference - i.e., relying on superpriority stemming from the declaration,
to which Freddie Mac could be deemed to have consented by buying the loan,
rather than relying solely on the superpriority granted by the statute?

This could lead to even more zombie properties in the next real estate
downturn - lenders were already hesitant to foreclose on condo units, and
now there will be no incentive at all for Freddie Mac loans to be
foreclosed until the market is very clearly recovered enough to recoup the
full loan amount.

This is really bad news for condo HOAs.

----------------------------------
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On Wed, Aug 30, 2017 at 10:01 AM, Rob Wilson-Hoss <rob at hctc.com> wrote:

> Mark, thanks. The issue to me is whether Washington's deed of trust act is
> sufficiently different from Nevada's to lead to a different conclusion. The
> precise point is not where the Agency, FHFA, as agent for FNMA and FHLMC,
> is prior when there is record notice; the issue I have is, when there is no
> record notice, how is anyone supposed to know that there is a prior
> interest (prior although later-filed or not filed at all by virtue of
> federal preemption)? Or whom to name and serve? This decision leaves a very
> large mess. No foreclosure lawsuit is safe. Is there a clearing house for
> finding out whether a note and/or deed of trust are in the hands of one of
> these?
>
>
>
> Rob
>
>
>
> Robert D. Wilson-Hoss
> Hoss & Wilson-Hoss, LLP
> 236 West Birch Street
> Shelton, WA 98584
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> *From:* wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.
> wsbarppt.com] *On Behalf Of *Mark Phelps
> *Sent:* Monday, August 28, 2017 11:04 AM
> *To:* WSBA Real Property Listserv
> *Subject:* [WSBARP] Condo Association Superpriority Liens vs. FHFA: Ninth
> Circuit Speaks
>
>
>
> Listmembers:
>
>
>
> An FYI that on Friday, per the attached, the Ninth Circuit decided against
> condo associations having superpriority liens and in favor of the FHFA as
> holder of FNMA and FHLMC loans. It  basically held that as the Nevada
> superpriority law conflicted with the FHFA statute, the statute preempted
> it.
>
>
>
> This decision, while, as it was in line with earlier Nevada DC decisions,
> was not unexpected, will impact association disputes on FNMA and FHLMC
> loans.
>
>
>
> Mark J. Phelps
>
> Attorney, Litigation Practice Group Leader
>
> Desh International & Business Law · www.deshlaw.com
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