There are 22 states that give homeowners associations (HOAs) super lien status in the event of a foreclosure. What that means is that if an HOA slaps a lien on a property that is in foreclosure – such as a condominium – due to lack of payment of HOA fees in one of those states, that lien could take ‘first position’ over all other liens or encumbrances on the property.
That, in turn, could result in an investor being able to acquire the property by simply paying-off the HOA lien, resulting in a severe loss for the servicer and its investor client.
Recently the Nevada Supreme Court and the District of Columbia Court of Appeals held that liens filed by HOAs take priority over all other liens in the event of a foreclosure. In the Nevada case, an $885,000 first lien on a property was lost when an investor paid $6,000 in delinquent HOA fees and took control of the property. Unless a request for notice (RFN) is filed and recorded to counteract future risks, investors and servicers are exposed to significant potential losses.
To address this problem, CoreLogic has introduced HOA Super Lien Check, a solution that helps investors and servicers monitor ‘at-risk’ properties in the 22 states that give HOAs super lien status.
Using this solution, servicers can quickly and easily identify loans in their portfolios that are within the 22 super lien states. What's more, they can match those loans to specific HOAs, as well as validate HOA contact information, including whether there is a master association, sub-association or property management company.
In addition the solution allows servicers to gather the required loan and property information needed to complete a request for notice. The system determines county filing requirements, produces the RFN and sends it to the county for recording.
‘The Nevada Court's decision is a wake-up call for our industry,’ explains Arlene Hyde, senior vice president of compliance and management solutions at CoreLogic. ‘Investors and lenders are asking their servicers what steps they're taking to protect their properties and are looking for alternatives to overcome the information and logistical challenges involved in filing RFNs and monitoring lien activity. Our approach draws upon CoreLogic property and mortgage data and also leverages the company's new CondoSafe national COA data base as well as our document retrieval and recording capabilities.’
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