A Serious Threat To Condominium Associations' Lien Priority
The lien priority that associations enjoy and regularly rely on is being threaten. Both Washington and Oregon have laws in place that give condominium associations a lien priority for unpaid assessments when a unit goes through a foreclosure. RCW 64.34.364 and ORS 100.450. In addition, some associations attempt to establish lien priority in their governing documents. These super-priority liens are vital to each association's economic well-being, which is why it is so surprising that they are being attacked by the federal government.
In 2014, the Federal Housing Finance Agency ("FHFA") adopted a new interpretation of the 2008 Housing and Economic Recovery Act that would, if enforced nationally, eliminate the lien priority for the association over the deed of trust, if the unit being foreclosed has a Fannie Mae or Freddie Mac deed of trust. In April of 2015, the FHFA reiterated its position by stating that FHFA "has not consented, and will not consent in the future, to the foreclosure or other extinguishment of any Fannie Mae or Freddie Mac lien or other property interest in connection with [homeowners' association] foreclosure of super-priority liens." The FHFA has already successfully voided an association's super-priority lien in a Federal District Court case in Nevada.
If the FHFA continues with its current approach and adopts the same policy in Washington and Oregon, it could have dire consequences for the associations that we all work so hard to support. Fortunately, on May 12, 2016, several senators and members of congress sent a letter to FHFA asking that it delay the implementation of its policy until after the FHFA solicits and considers public comment. We encourage you, your boards and your unit owners to express your concerns to your federal senator and congress members. The FHFA needs to understand the significant adverse impact its policy would have on condominium associations.