Nevada is just one of a number of states that is experiencing losses in property sale values as a result of homeowner association foreclosures, according to a recent report by the Nevada Association of Realtors. Statutes in Nevada allow HOAs to foreclose on homeowners for not paying their association dues. HOA liens are given the higher priority over first mortgage holders, so their debt is first, paid off and then the lender and homeowner are taken out of the equation. As a result, many people are able to get foreclosed homes at auction for a fraction of the price by paying back HOA dues compared to what homes were initially worth. Further, all remaining debt is erased, and borrowers can be stuck paying back mortgages for houses they no longer possess. Homeowners association foreclosures are a controversial subject in Nevada. According to a report by the Nevada Department of Business and Industry, 77 percent of Nevada residents surveyed oppose HOAs ability to foreclose on homes because of unpaid dues. Eighty-two percent believe that debt to lenders should be paid before debt to HOAs. Read more: One of Nevada’s leading law firms not only enabled a criminal conspiracy but also participated in it, according to District Judge Mark Denton. Kummer Kaempfer Bonner Renshaw and Ferrario was so negligent it enabled contractor Leon Benzer to cheat a homeowners association out of $8 million. On Tuesday, Denton ordered the law firm now known as Kaempfer Crowell to pay $3.1 million to the Vistana Condominium Owners Association. The judgment is nearly $2.4 million; the rest is interest. “The judgment could exceed $4 million after costs and attorneys’ fees are added,” said Vistana attorney Richard Haskin, although that’s up to the judge. Denton’s findings of negligence and breach of duty against Kummer Kaempfer were plentiful and brutal. JDSUPRA BUSINESS ADVISOR: The Super-Priority Saga Continues – Nevada Supreme Court Holds That NRS 116’s Notice Provisions Are Constitutional By Aaron Chastain, J. Hunter Robinson – Bradley Arant Boult Cummings LLP January 27, 2017 The Ninth Circuit sent shockwaves through the mortgage industry when it held that NRS 116—the statute allowing an HOA to impose a nominal super-priority lien that can extinguish a senior deed of trust when foreclosed—was facially unconstitutional under the Due Process Clause in Bourne Valley Court Trust v. Wells Fargo Bank, N.A. In Bourne Valley (see our previous blog posts on this decisionhere and here), the Ninth Circuit held that NRS 116’s notice scheme did not mandate that mortgagees receive actual notice of these HOA super-priority lien foreclosures, but instead required that mortgagees request such notice from the HOA in advance of the HOA’s foreclosure sale. The Ninth Circuit determined this “opt-in” notice scheme violated the Due Process Clause’s requirement that statutes authorizing the extinguishment of junior liens mandate that junior lienholders receive actual notice of the foreclosure sales that can extinguish their liens. Importantly, the Ninth Circuit held that an HOA’s foreclosure under NRS 116 constituted state action, a threshold determination in Due Process Clause challenges, as the Due Process Clause only applies to state actions. Specifically, the Ninth Circuit held that NRS 116 foreclosures constitute state action because HOA liens are purely statutory, rather than contractual, like deeds of trust. Because an HOA could not impose and foreclose on its super-priority lien absent the statutory authority granted to it through NRS 116, an HOA’s super-priority lien foreclosure constitutes state action under Bourne Valley. Read more: http://www.jdsupra.com/legalnews/the-super-priority-saga-continues-52444/ Your Sunday editorial, “Super liens: What about property rights?” really missed the mark. It was easy for you to make the same mistake the courts are making because that’s how the big money players have set the stage. The banks, the debt collection companies and the vulture investors have framed the issue in the courts to focus on super-priority details so they can completely obfuscate how they have been victimizing both the homeowners and the HOAs. Your editorial opined: “But the bank sued, arguing convincingly that the HOA has no right to confiscate its asset.” The bank’s asset? Really? What about the homeowner? The house isn’t the bank’s asset. It belongs to the homeowner, who is the equitable title holder, until there is a legal foreclosure. It might surprise you that many of these houses that went to HOA foreclosure sales were houses that the banks couldn’t foreclose on because they couldn’t meet the standard of Nevada’s 2011 robo-signing law designed to prevent foreclosure fraud caused by banks recording false affidavits about who actually owned the debt. It might also surprise you to know that the property rights of the homeowners who lost their houses to HOA foreclosures were violated when their homes were taken without due process. It might also surprise you to know that the debt collectors are often the same companies that manage the HOAs and have set up a self-serving system whereby the HOA board decides to foreclose without notifying the homeowner or giving him a chance to have an open hearing. Then, once the HOA sale is going to happen and the bank and the homeowner haven’t been told when, the debt collection company sells it and keeps all the excess proceeds after giving the HOA the legal minimum of nine months back dues. Lot of property rights violated before you even get to the banks, I’d say. Read: NEVADA- Homeowners Associations: The Robin Hood of Foreclosure
NEVADA – Law firm ordered to pay $3.1M to Las Vegas condo association
Nevada: NVAR Report Shows HOA Foreclosures Reduced Nevada Property Values by over $1 Billion
NEVADA – The Super-Priority Saga Continues – Nevada Supreme Court Holds That NRS 116’s Notice Provisions Are Constitutional
NEVADA – HOAs, foreclosures and property rights
News from Nevada
DSNEWS: Homeowners Associations: The Robin Hood of Foreclosure
By Joey Pizzolato
June 7, 2017
Las Vegas Review-Journal: Law firm ordered to pay $3.1M to Las Vegas condo association
By Jane Ann Morrison
June 28, 2017
Read more:
July 5, 2017 By Press Release Wire —Comments
A report from the Nevada Association of REALTORS (NVAR) found that foreclosures by local homeowner associations have reduced property values in the state’s two most populated counties by more than $1 billion. This was just one of the findings in a report released this week by NVAR about issues surrounding foreclosures by homeowner associations and so-called super priority lien laws that allow HOAs to foreclose on homes in a way that places a higher priority on repaying late HOA fees than repaying the mortgage when these homes are sold following a foreclosure.
As part of its report, NVAR worked with the Lied Institute for Real Estate Studies at UNLV and with a research firm called SGS that surveyed more than 500 registered voters throughout Nevada to measure their views on HOAs, super priority liens and related issues. The report concluded that “HOA foreclosures in Nevada cause an enormous impact on home values.”
According to the report, HOA foreclosures in Washoe County sold for “a remarkable 90 percent discount” compared to comparable home sales in the area, accounting for a loss of nearly $254 million in property sales value. In Clark County, the hundreds of homes sold through an HOA foreclosure in recent years sold for an average discount of 42 percent, leading to a loss of about $840 million in property sales value.
“So, in our two most populated counties, these HOA foreclosures had a negative impact of more than $1 billion on local property values,” NVAR President Greg Martin said. “That’s a real eye-opener.” Martin, a longtime REALTOR based in Elko, said NVAR spent months preparing “a comprehensive and revealing report on a fairly complex issue” that has had a significant impact on local homeowners and communities, as well as on Nevada’s economy.
The report explains that a super priority lien is a category of lien that, under Nevada law, is given a higher priority than all other types of liens. When it comes to HOA assessment liens, a super priority lien refers to that portion of a homeowner association lien that is given higher priority than even the holder of the first mortgage, placing the interest of the HOA in front of the first mortgage. When an HOA forecloses via a super priority lien, it may, in some cases, eliminate the first mortgage on the home.
For example, in Nevada, the state Supreme Court has ruled that an HOA super priority lien can extinguish a first deed of trust in a foreclosure. An example of this would be a scenario involving a homeowner who defaults on HOA dues, and instead of the lender initiating foreclosure proceedings, the HOA does so, and typically sells the property at auction as a bank would. Because the HOA has super priority status, the winning bidder for the home pays the HOA its back dues. Then, under Nevada law, all the remaining debts are extinguished. The lender who financed the mortgage on the home gets nothing, the report explains. Losses endured by the lender usually far exceed those of the HOA.
NVAR’s report found that 77 percent of all Nevadans surveyed oppose HOAs having the power to foreclose on homes over unpaid association dues. In addition, 82 percent of all respondents think that the mortgage lender should be paid first, not the HOA.
According to the survey, 44 percent of all Nevadans had an unfavorable view of HOAs, compared to 29 percent who had a favorable opinion.
The report examined 611 HOA foreclosures recorded in Clark County between Jan. 1, 2013 and June 30, 2016, plus another 71 HOA foreclosures recorded in Washoe County during this same time. It found that HOA foreclosures spiked following a landmark 2014 lawsuit between U.S. Bank and SFR Investments before starting to decline in December of 2014. Since then, the report said HOA foreclosures in Nevada “have settled at around 10 per month.”
Unlike past NVAR reports on issues important to the state and its homeowners – such as NVAR’s award-winning “Face of Foreclosure” series released to coincide with past sessions of the Nevada Legislature – Martin said this NVAR report is not recommending specific changes to state law. Instead, he said NVAR leaders hope this year’s report educates and informs state lawmakers, government leaders and others about this complex issue.
See also
Las Vegas Review Journal: HOAs, foreclosures and property rights
September 17, 2016
By Nona Tobin