Black Knight Data and Analytics’ latest tool, HOA Lien Pro, is designed to protect mortgage servicers and investors from significant losses that could result from "super liens," which are becoming a growing concern in the industry.
A super lien is recorded by homeowner's associations for delinquent accounts that put the HOA in first lien position, superseding the mortgage and relegating servicers and investors to junior lien holder status.
During the housing crisis, numerous states granted super liens to HOAs to ensure that HOAs received the funds necessary to adequately maintain the communities they serve. But it's a contentious subject for people in the housing industry.
"Considering the explosive growth in community associations over the last 10 years, and the fact that 22 states now grant super-lien status to HOA assessment liens, this is a critical issue for mortgage servicers and the GSEs," said Kevin Coop, president of Black Knight Data and Analytics, a division of Black Knight Financial Services. "HOA Lien Pro is a simple, cost-effective way to help mortgage servicers and investors reduce the risk of having their first lien positions extinguished by HOA super liens."
Many servicers are unaware of HOA liens on properties under their care since there is no central HOA information database.
HOA Lien Pro pulls data from title plants to provide critical information such as lien-recorded dates, document numbers, document types, party names and lien amounts. When delinquent HOA obligations are identified for properties in a servicer's portfolio, the late HOA fees can be cleared to preserve the servicer's first-lien status.
In addition, HOA Lien Pro can be used to perform ongoing monitoring for super liens or to conduct a one-time search. Loan and batch processing can usually be completed within a day and results are easy for servicers to process, the company said.
Back in November, the Nevada Supreme Court upheld a law allowing homeowner's associations to foreclose on homes ahead of first-mortgage providers, solidifying “super lien” priority for HOA claims in Nevada.
The FHFA said that it filed an action in federal court in Nevada on Dec. 5, “seeking a determination that a HOA's foreclosure sale is invalid and contrary to federal law to the extent that it purports to extinguish Fannie Mae's property rights.”
The FHFA said that these FHFA actions are based on federal law which “precludes involuntary extinguishment of liens held by Fannie Mae or Freddie Mac while they are operating in conservatorships and bars holders of other liens, including HOAs, from taking any action that would extinguish a Fannie Mae or Freddie Mac lien, security interest or other property interest.”
“Unfortunately, Nevada is just the tip of the iceberg — 20 other states have laws that grant super-lien status to HOA assessment liens, and the precedent set in Nevada will be felt throughout the country,” said Jason Tufaro, vice president of business development for Matt Martin Real Estate Management. “There are nearly 3,000 HOAs in Nevada, covering more than 500,000 properties. But nationwide that number balloons to 350,000 HOAs, covering 25 million households.
As a result, Tufaro outlined steps to help get out ahead of this potential time bomb, which can be found here.