Fannie Mae announced that it requires servicers to ensure any priority liens for delinquent HOA dues and assessments on acquired properties are cleared immediately, but no later than 30 days, after the foreclosure sale or acceptance of a deed-in-lieu of foreclosure.
Fannie Mae also said that it requires servicers to advance funds when the servicer is notified by an HOA for a PUD or condo project that the borrower is 60 days delinquent in the payment of assessments or charges levied by the association if payment is necessary to protect the priority of Fannie Mae’s mortgage lien. Thus, in states with a true super-priority lien (an assessment lien that leap-frog\’s over the mortgage), association cash flow is protected. That is not the case in Florida unfortunately where the association\’s lien only has priority to safe harbor limits.
This announcement should serve as a warning to associations as well because all servicers are instructed to contact Fannie Mae\’s legal department when or if an association refuses to release its claim of lien against a property in exchange for payment of the amount due under the applicable statutes and/or governing documents.
What about the Safe Harbor? Is that always payable by a mortgagee?
For associations in Florida, this announcement means you should think twice about even asking for the piddly statutory safe harbor amounts when the documents release mortgagees from liability like in the Coral Lakes case. If you are not familiar with the case ruling, it basically stands for the proposition that mortgagees may not have to pay anything (not even the 12 months or 1% safe harbor amounts) after foreclosure or deed in lieu of foreclosure when the documents contain certain language.
Community association leaders in Florida should already weigh the benefits against the detriments possible from asking for more than the safe harbor amounts like we discussed in Associations Facing Lawsuits Over Claimed Billing Errors and The Truth About HB 319. Fannie Mae has apparently geared up for addressing these issues.
What about afterwards? Can\’t they pay assessments going forward on a timely basis?
Fannie regulations say that servicers must honor association obligations once the foreclosure sale takes place and the lender takes back the property. The 2012 Servicing Guide specifically requires payment of HOA/Condo dues and property taxes as they come due – not ignore those obligations for months and months. Furthermore, servicers are requires to notify the association of the transfer and provide management with a new billing address for fees/assessments.
Source: Florida Condo HOA Law Blog