Government Affairs - Lien Priority
The
Federal Housing Finance Agency (FHFA) released a statement on December 22, 2014 expressing concern about state statutes that allow community associations to
obtain lien priority over first mortgages for unpaid association assessments.
By asking a federal court to intervene, FHFA is trying to bail out mortgage
servicers that have failed to fulfill basic contractual obligations to Fannie
Mae and Freddie Mac.
"Make
no mistake, FHFA is bailing out mortgage servicers that lacked the competency
to meet basic contractual requirements and follow established rules of civil
procedure," said Thomas M. Skiba, CAE, chief executive officer of
Community Associations Institute (CAI). "By suing community
associations, FHFA is trying to protect Fannie and Freddie at the expense of
association homeowners. That's unfair, unconscionable and unacceptable."
For years, CAI has joined with federal regulators (as well as Fannie Mae) to call on mortgage servicers to secure and maintain vacant and abandoned properties and meet their financial obligations to community associations and their homeowners. These calls and regulatory directives have been largely ignored with impunity by mortgage servicers.
"In
one case, Fannie Mae’s servicers failed to respond to legal service of
process and, despite mandatory notification pursuant to Nevada law, failed to
appear at a foreclosure auction to protect Fannie Mae's financial
interests," Skiba continued. "It says a lot about FHFA priorities
that the agency now is suing to recoup Fannie Mae's losses from the pockets
of community association homeowners, rather than suing servicers for breach
of contract. Someone must stand up for homeowners and that’s what CAI will
continue to do."
FHFA
is nothing if not strategic, electing to release its statement
on the heels of a lawsuit filed by the agency in federal court in Nevada.
FHFA is seeking a determination that an HOA's foreclosure sale is invalid and
contrary to federal law because it would extinguish Fannie Mae's property
rights. However, the right of foreclosure FHFA is seeking to invalidate
nationwide is permitted by law in Nevada, 21 other states and the District of
Columbia.
FHFA
asserts that it is compelled by law to file suit to protect Fannie Mae's and
Freddie Mac's rights and to prevent taxpayers from incurring losses. Skiba
said the FHFA statement "blatantly ignores" Fannie Mae and Freddie
Mac rights under the respective seller/servicing guides that allow these
mammoth enterprises to recover losses resulting from the mismanagement of
mortgage servicers. Despite a range of available remedies, FHFA has opted to
sue to invalidate state priority lien statutes rather than enforcing its
rights under contract.
"It's
incredulous that a Federal agency would sacrifice the interests of 65 million
taxpayers who live in community associations to protect the very banks all
American taxpayers spent billions of dollars to bail out during the
economy-shattering housing crisis," Skiba said. "And it’s shocking
for FHFA to attack state laws that have been in place for more than 100 years
of precedent and practice. Fact is, by paying their association assessments
and protecting property values, these homeowners protect the value of
lenders' assets in associations. Yet, FHFA is enabling the bad behavior of
mortgage servicers who don't spend a dime to maintain and protect their own
property investments."
CAI
will continue to monitor FHFA's hostile actions against the right of
community associations to secure priority liens on properties within their
boundaries.”
Get
more information on the priority lien issue, including a detailed CAI statement and a map of states with priority lien statutes See the Nevada Supreme Court decision.
With
more than 33,000 members dedicated to building better communities, CAI works
in partnership with 60 chapters to provide information, education and
resources to community associations and the professionals who support them.
CAI’s mission is to inspire professionalism, effective leadership and
responsible citizenship—ideals reflected in communities that are preferred
places to call home. Visit www.caionline.org or call (888) 224-4321.
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