ABA and several other trade groups yesterday released a statement of principles on “super-priority” liens placed by homeowner associations that in some states have been recognized as senior even to claims by first-lien mortgage holders. The principles come in response to cases in states like Nevada, where courts have allowed HOAs to foreclose on homes when HOA dues are in arrears, extinguish the first-lien mortgage, and sell homes for a fraction of their value.
The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, has also expressed concern about the practice of making unpaid HOA dues senior to first-lien mortgages. FHFA has filed suit to invalidate HOA foreclosures on GSE mortgages.