DS News

» VISIT US ONLINE @ DSNEWS.COM 93 IN THE NEWS Lenders Appeal Court Decision Allowing HOAs to Extinguish Mortgages Several mortgage lenders have asked the Nevada Supreme Court to reverse a decision it made in September that a homeowners association's (HOA) super priority lien can extinguish a first deed of trust nonjudicially on a residential property. e ruling, which was issued by only a 4-3 majority, has only caused more debate in Nevada between mortgage lenders and housing investors over whether or not HOAs should have the right to extinguish a lender's mortgage on a foreclosed property without going through the courts. e ruling allows HOAs to legally fore- close on a property that is delinquent on dues payments and auction off the title to the prop- erty without the involvement of the lender or courts. e sale of the title by the HOA extin- guishes the first mortgage, an action that the lenders argue is not in the best interest of either homeowners or lenders. Lenders contend that HOAs should have to go through courts when initiating a foreclosure on a residential property and they should not have the power to extin- guish mortgages nonjudicially. Lenders view the court decision in Ne- vada as an industry-wide concern that could spell disaster for the mortgage industry as a whole, especially if it sets a precedent for other states. "By requiring an HOA to bring a judicial foreclosure action in order to extinguish a pre-existing deed of trust, the Legislature accorded important protections both to lenders—whose significant property interests an HOA foreclosure puts in jeopardy—and to homeowners—who face the prospect of losing their homes," the appeal said. "By dispensing with the judicial foreclosure requirement, the majority opinion fatally undermines both protections." One case central to the Nevada Supreme Court decision involves a house sold in Las Vegas in 2007 with a mortgage loan for $885,000 originated by Bank of America. e owner defaulted on the loan a year later and Southern Highlands Community Associa- tion foreclosed on the property. e associa- tion sold the house at an auction in Sep- tember 2012 to SFR Investments Pool 1 for IN THE NEWS Foreclosure Activity Way Down in New Mexico for Q3 Foreclosure activity plummeted in New Mexico both in the third quarter and in Sep- tember, according to RealtyTrac's Q 3 2014 Foreclosure Report. e state reported 1,177 foreclosure filings (which include default notices, scheduled foreclosure auctions, and REO activity/ lender repossessions) for the third quarter of 2014, a decline of 16.5 percent from Q2 and a drop of 53.2 percent from the same period in 2013 when more than 2,500 foreclosure filings were reported, according to RealtyTrac. Overall in Q 3, one in every 765 residential housing units had a foreclosure filing in New Mexico, which ranked the state 31st in the nation, according to RealtyTrac. e national average for the quarter was one foreclosure filing for every 415 housing units. New Mexico's foreclosure rate for the month of September was much lower than it was overall in the third quarter. For Sep- tember, the state reported one foreclosure filing for every 2,841 residential housing units, which comprised 4 percent of the nearly 900,000 housing units in New Mexico. at ranked the state 36th in the nation in foreclosure rate for September, according to RealtyTrac. e national average foreclosure rate in September was one for every 1,232 housing units, or 8 percent of all residential hous- ing units in the country. New Mexico's rate was less than half of the national average for September, according to RealtyTrac. New Mexico totaled only 317 foreclosure filings in September, which was a decline of 33.8 percent from August and a drop of 36.4 percent from September 2013. It was the 15th lowest total of any state in the nation among states that reported data. RealtyTrac reported a total of 106,866 foreclosure filings nation- wide in September and 317,171 nationwide for the third quarter. $6,000—the amount the homeowner owed in delinquent HOA dues. When Bank of America tried to schedule its own foreclosure auction on the house the following Decem- ber, SFR Investments made a filing to stop Bank of America's foreclosure auction, claim- ing that the mortgage had been extinguished when SFR bought the house in September. "e court's interpretation that Nevada law does not require judicial foreclosure sacrifices lenders' and homeowners' inter- ests, while giving third-party investors an unjustifiable windfall," a Bank of America spokesman said. "For example, the opinion endangers the right of redemption and other protections for homeowners, as well as allow- ing a lender's security in substantial loans to be taken without due process." Bank of America litigated the case as the servicer of the mortgage, filing suit on behalf of U.S. Bank, the trustee for the mortgage's securities. Bank of America won a lower court decision but the Nevada Supreme Court reversed that ruling on September 18, saying that the lender could have stepped in and paid the lien. Lenders told the court that sometimes HOAs will not reveal the amount owed in delinquent dues and sometimes will not accept payment from the lenders. New Mexico RANK: 9 90+ Day Foreclosure Unemployment Delinquency Rate Rate Rate SEPTEMBER 2014 1.77% 2.28% 6.6 YEAR AGO 1.94% 2.76% 6.9 YEAR-OVER-YEAR CHANGE -9.0% -17.4% -0.3 Top County TORRANCE COUNTY 90+ Day Foreclosure Delinquency Rate Rate SEPTEMBER 2014 2.74% 5.43% YEAR AGO 2.40% 5.22% YEAR-OVER-YEAR CHANGE 14.1% 4.0% Top Core-Based Statistical Area GRANTS, NM 90+ Day Foreclosure Delinquency Rate Rate SEPTEMBER 2014 1.91% 3.88% YEAR AGO 1.73% 4.58% YEAR-OVER-YEAR CHANGE 10.6% -15.4% note: The 90+ day delinquecy rate is the percentage of outstanding mortgage loans that are seriously delinquent. The foreclosure rate is the percentage of outstanding mortgage loans currently in foreclosure. State rank is based on the September 2014 foreclosure rate. All figures are rounded to the nearest decimal. The unemployment rate reflects preliminary September 2014 figures released by the Bureau of Labor Statistics. All other data courtesy of LPS Data & Analytics. New Mexico totaled 408 foreclosure filings in October 2014, the 14th lowest total in the U.S., according to RealtyTrac. KNOW THIS

• Cover