Recently the Nevada Supreme court issued an opinion ruling that a homeowners association (HOA) lien is a true super-priority lien that, if foreclosed upon, extinguishes a first deed of trust (the mortgage). The Radcliffe Group has recorded a video series with attorney, David J. Wedemeyer, Esq., discussing how this ruling will affect homeowners, and how residential lenders underwrite and structure their loans moving forward, and how it will affect the long-term servicing of residential loans. It means HOAs will get paid before a mortgage debt will.
HOA are foreclosing on liens for assessments, and third parties are buying homes at the resulting foreclosure sales, pennies on the dollar, sometimes only $5,000-$10,000 which is a small fraction of the marketable value of the property. Although it was generally accepted that the HOA’s foreclosure extinguished the homeowner’s title and interest in the home, the question of whether such foreclosure also extinguished a first deed of trust was up in the air. It has been ruled that it does extinguish the mortgage. The court reasoned that a junior lien-holder can simply pay off an HOA lien or establish an escrow account to pay HOA dues. These two actions, if not provided for by the lender, result in an inequity of the lender’s own doing when the lender loses its first deed of trust. This has lenders up in arms. If a HOA sale can extinguish a first deed of trust, the lender is left with an enormous unsecured debt and the homeowner is left with an enormous deficiency judgment to the lender. In short what does this mean? Likely HOAs will get paid, one way or another, by the deficient homeowner or by the lender who wants to secure their interest. There are still many questions left unanswered, such as how loans will be structured for properties in an HOA moving forward, so the lender interest is secured. Check out our 3 part video series and give us a call if we can be a resource to you or someone you know who may be facing HOA liens or foreclosure issues, we would be happy to help. (702)379-3401 www.DaveRadcliffeVegas.com
Written By Nickel Lowman
For the Radcliffe Group
Keller Williams Realty Southwest