U.S. District Court over Nevada Renders Favorable Decision for FHFA Regarding HOA Super Priority Liens

On Wednesday, a decision was rendered in the U.S. District Court for the District of Nevada—favorable to Fannie Mae and FHFA as its conservator—on the issue of homeowners association (HOA) “super priority” liens. In Skylights LLC v. Byron et al, FHFA and Fannie Mae did not dispute that recently upheld Nevada law allows an HOA’s foreclosure of its super priority lien to extinguish an otherwise first position deed of trust if that lien is not properly satisfied by an otherwise superior lienholder or encumbrancer. However, FHFA and Fannie Mae counterclaimed that provisions of the federal Housing and Economic Recovery Act of 2008 (HERA) prohibit an HOA from foreclosing on Fannie Mae’s property interests without the consent of its conservator, FHFA. Given that FHFA did not consent to this extinguishment (and has publically stated it will not do so), the District Court determined that the HOA’s foreclosure sale did not extinguish Fannie Mae’s property interests, nor allow the property to be conveyed free of this encumbrance. As a result, FHFA and Fannie Mae were granted their motion for summary judgment on Skylights’ claim for quiet title. While this court decision is not controlling in other jurisdictions, it does provide a favorable precedent for this HERA argument.