Condo Media - March 2015 - 26

SUPERLIEN SHOWDOWN
At the federal level, the Federal
Housing Finance Administration
(FHFA), overseer for Fannie Mae
and Freddie Mac, announced recently that the two secondary market
giants will not purchase mortgages
subject to a priority lien. The government services enterprises (GSEs)
have been operating under federal
conservatorship since stumbling
badly at the outset of the housing
market crisis.
One of the "bedrock principles"
behind their continued support of
the housing market, the FHFA says,
is the assumption that they will be
first in line to recover the proceeds
after a foreclosure sale. Mortgages
purchased by Fannie and Freddie
"must remain in first lien position,"
the FHFA says, noting that federal
law "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."
The FHFA's policy statement was
apparently triggered in part by a Nevada Supreme Court decision affirming the priority status of a community
association lien. The association
had foreclosed on a long-delinquent
homeowner because the mortgage
lender had failed to do so. The FHFA
had asked the Nevada court to rule
that the HOA's foreclosure sale was
invalid, which the court declined to
do. The agency says it will file similar
actions in other states "to void foreclosures that purport to extinguish
Enterprise property interest in a manner that contravenes federal law."
'UNFAIR AND UNACCEPTABLE'
The Community Associations Institute (CAI), which had submitted an
amicus ("friend-of-the-court") brief
in the Nevada suit, blasted the FHFA
for a policy that Thomas Skiba, CAI's
chief executive officer, says protects

26

CONDOMEDIA

CAI blasted the
FHFA for a
policy that
Thomas
Skiba, CAI's
CEO, says
protects lenders at the expense of homeowners. "That
is unfair, unconscionable, and unacceptable," he
stated. "CAI will continue to monitor FHFA's
hostile actions against the right of community
associations to secure priority liens on properties
within their boundaries."
lenders at the expense of homeowners. "That is unfair, unconscionable,
and unacceptable," Skiba stated,
adding, "CAI will continue to monitor FHFA's hostile actions against
the right of community associations
to secure priority liens on properties
within their boundaries."
In Massachusetts, community
associations and their attorneys
are coming to grips with an Appeals
Court ruling that associations securing their superlien rights may not
have multiple liens in place but must
wait until an existing lien has expired
before seeking to impose another.
That decision (in Drummer Boy
Homes Association, Inc. vs. Carolyn
P. Britton et. al.) did not invalidate
the Massachusetts priority lien,
which allows associations to recover
up to six months of delinquent payments and attorney fees, nor did
it assert (as some had feared) that
associations are limited to a single
priority lien during the life of a loan.
But the ruling (which the plaintiffs
are expected to appeal) did bar the
common industry practice of impos-

ing overlapping or "rolling" liens to
close collection gaps resulting when
delinquencies span multiple sixmonth periods.
As that litigation played out last
year, CAI's Massachusetts Legislative
Action Committee (MALAC) sought
a legislative remedy via a bill clarifying that the superlien provision in
the state condominium statute allows
rolling liens. The state Senate approved the measure in July, and the
MALAC "fought like the devil" to win
House approval, reported Matthew
Gaines, Esq., the MALAC chairman
and a partner in Marcus, Errico, Emmer & Brooks, P.C.
"But the banks weighed in against
the bill at the last minute," he says,
and the legislation died.
Gaines says he doesn't know why
banks are suddenly opposing a
practice "they have lived with for 20
years." The MALAC will try again
this year to win legislative approval
for the bill, but given the opposition,
he says, the committee may see if it
is possible to "tweak" the measure to
address industry concerns.
Condo Media - March 2015

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